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| Author: | Laussel, D. Le Breton, M. |
| Title: | A general equilibrium theory of firm formation based on individual unobservable skills |
| Journal: | European Economic Review
1995 : AUG, VOL. 39:7, p. 1303-1320 |
| Index terms: | THEORIES COMPANIES SKILLS |
| Language: | eng |
| Abstract: | A model of firm formation is built along the lines of Knight (1921). Contrary to Kihlstorm and Laffont (1979) the individuals are risk-neutral but have different productive efficiencies. The authors suppose that the individuals who are the more efficient workers are also the more efficient entrepreneurs. Each agent chooses the activity which gives her the larger expected income. In equilibrium the more efficient people become entrepreneurs and, under a special kind of increasing returns to scale assumptions, this is also what is implied by efficiency considerations. |
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