Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Compared to more established firms, young firms tend to hire younger workers and provide them with lower earnings. To understand these facts, a dynamic model of entrepreneurship is constructed, where individuals can become entrepreneurs, or work in either a corporate or an entrepreneurial sector. Sectoral differences in production technology, financial constraints, and labor market frictions lead to sector-specific wages and worker sorting into the entrepreneurial sector by productivity and assets. Individuals with lower assets tend to accept jobs in the entrepreneurial sector, an implication that finds support in the data. The analysis indicates that sector-specific labor market frictions are critical to the model's ability to generate worker sorting and to match the key features of the entrepreneurial sector. (Copyright: Elsevier)