Self-employment, Capital and Job Search: Evidence from a Structural Model
Department of Economics
Tuesday, February 27, 2018
Taylor-Hibbard Seminar Room (Rm103)
12:00 pm-1:15 pm
We build a structural life-cycle model of sectoral choice and entrepreneurship. Our model allows endogenous career choices, capital accumulation and permanent heterogeneity (in both wage productivity and self-employment productivity). We estimate our model using a long panel from urban Ghana, and show that our model fits the data well. Our model serves three related purposes. First, we provide a unified and formal framework to rationalise a number of disparate stylised facts from recent empirical work. Second, in doing so, we are able to quantify the relative importance of key barriers to opportunity: search frictions, capital constraints, and heterogeneous ability. Third, we combine our model with methods from information theory, to provide a novel comparison of the informativeness of several potential field experiments. Our results imply important roles for sectoral frictions and capital constraints in limiting career opportunities.