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Credit crunches and credit allocation in a model of entrepreneurship

Bassetto, M; Cagetti, M; De Nardi, M; (2013) Credit crunches and credit allocation in a model of entrepreneurship. (National Bureau of Economic Research Working Papers 19296). National Bureau of Economic Research: Cambridge, US. Green open access

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Abstract

We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm size distribution. As entrepreneurial firms can grow only slowly and rely heavily on retained earnings to expand the size of their business in this set-up, we show that, by reducing entrepreneurial firm size and earnings, negative shocks have a very persistent effect on real activity. In determining the speed of recovery from an adverse economic shock, the most important factor is the extent to which the shock erodes entrepreneurial wealth.

Type: Working / discussion paper
Title: Credit crunches and credit allocation in a model of entrepreneurship
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.nber.org/papers/w19296
Additional information: © 2013 by Marco Bassetto, Marco Cagetti, and Mariacristina De Nardi. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1465407
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