Journal of Monetary Economics 2019 DOI: 10.1016/j.jmoneco.2018.12.003 View full text
Lian Allub, Andrés Erosa

Abstract: We develop a quantitative theory of entrepreneurship, income inequality, and financial frictions disciplined with household data from Brazil. The theory extends Lucas (1978) by modeling heterogeneity in two skills:-working and managerial skills. Consistently with the evidence, the theory implies three occupational categories: workers, employers, and self-employed entrepreneurs. We find that the correlation between working and managerial skills matters importantly for the distribution of earnings across occupat…

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