This paper provides new theory and evidence on the relationship between ability and entrepreneurship. I show that there is a U-shaped relationship between the probability of entrepreneurship and both a person's schooling and wage when employed. This pattern can be explained in a model of...

This paper evaluates the size of these effects when distortions affect not only resource allocation but also the evolution of firm level productivity itself. To this end, we partially endogenize the evolution of firm level productivity in a standard heterogeneous firm model by allowing firms to...