Production complementarities and flexibility in a model of entrepreneurship |
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| Institution: | 1. University of Minnesota, 4-171 Hanson Hall 1925 Fourth Street South,Minneapolis, MN 55455, United States;2. University of Oregon, 1285 University of Oregon, Eugene, OR 97403, United States;3. University of Chicago, 5757 S University of Chicago, IL 60637, United States;4. New York University, 19 West 4th Street, New York, NY 10003, United States;1. Sveriges Riksbank, Monetary Policy Department – Research, SE-103 37 Stockholm, Sweden;2. Bank for International Settlements, Switzerland;3. European Central Bank, Germany;4. Université Libre de Bruxelles – SBSEM and ECARES, and CEPR, Belgium;1. Department of Economics, University of Munich, Schackstrasse 4, Munich 80539, Germany;2. CEPR;3. IZA;4. Department of Economics, Arizona State University, W.P. Carey School of Business, Tempe, AZ 85287-9801, USA |
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| Abstract: | The focus of this paper is the flexibility in working hours as a motive for entrepreneurship. The model exhibits inflexibilities for workers and entrepreneurs, which arise due to complementarities in production. In addition, it allows for volatile value of leisure to make flexibility in hours desirable. Differences in occupation-specific flexibility, disciplined with the observed patterns in hours (level, persistence, dispersion) and income (persistence, dispersion), can explain relatively low income levels of entrepreneurs in the US and the occupation-specific distributions of working hours and income. Policy relevance of the model features is discussed using experiments of workweek restrictions and income taxation. |
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| Keywords: | Entrepreneurship Labor supply Production Income distribution |
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