Emerging Tech

Financial Development, Entrepreneurship And Job Satisfaction

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Executive Summary

This paper shows that utility differences between the self-employed and the employees increase with financial development. This effect is not explained by increased profits but by an increased value of non-monetary benefits, in particular job independence. The authors interpret these findings by building a simple occupational choice model in which financial constraints may impede firms' creation and depress labor demand, thereby pushing some individuals into self-employment for lack of salaried jobs. In this setting, financial development favors a better matching between individual motivation and occupation, thereby increasing entrepreneurial utility despite increasing competition and so reducing profits.

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