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  • Entrepreneurship, growth and productivity with bubbles

  • 2022-05-20

  • Speaker: Xavier Raurich
  • Institution: University of Barcelona
  • Place: Seminario 3 14:30
  • Event type: Weekly Seminars
  • Entrepreneurship, growth and total factor productivity are larger when asset prices are high and decline during financial crises. We explain these facts using a growth model with bubbles in which individuals have heterogeneous wages and returns on productive investment. Heterogeneity separates individuals between savers and entrepreneurs. Savers buy financial assets, which are deposits or a financial bubble. Entrepreneurs incur in a start-up cost and borrow to invest in productive capital. The bubble provides liquidities to credit-constrained entrepreneurs. These liquidities increase investment and entrepreneurship. Finally, the bubble may increase productivity when the return on investment is correlated with wages.

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