Research

Working Papers:

“Entrepreneurial Human Capital and Firm Informality” with Luis Franjo and Francesco Turino (Draft coming soon)

Abstract: This paper assesses the relationship between entrepreneurial investments in human capital and firm informality in presence of financial frictions. To this end, we develop a life-cycle general equilibrium model of entrepreneurship with credit market imperfections, limited tax enforcement and endogenous educational choice. Our quantitative analysis suggests that factors facilitating higher educational attainments of entrepreneurs enhance firm formalization through availability of skilled labor and higher firm productivity. The magnitude of the effect crucially depends upon the degree of credit market imperfections of the economy.