Economic Transition, Entrepreneurial Capacity, and Intergenerational Distribution
28 Pages Posted: 3 Feb 2006
Date Written: October 2002
A defining feature of transition economies is the expansion of the private sector. Motivated by the observation that new enterprises in transition economies seem to have a strong preference for recruiting young people, this paper studies intergenerational redistribution following from market reforms that stimulate private sector activity and firm creation. We implement a theoretical model and find that in some cases more than half of the current working age population may be made worse off by an increase in entrepreneurial capacity. This may help explain why market reforms have been voted down despite their long-run benefits.
Keywords: Transition economies structural reforms economic growth intergenerational distribution dynamic general equilibrium models
JEL Classification: O11 O21 O31 O33 C68
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