The paper proposes an intertemporal equilibrium model with monopolistic competition and free entry to explain the nexus between business formation and medium run growth. An investment externality is identified that results in underaccumulation of capital in the decentralized market equilibrium...

This paper proposes a simple partial equilibrium model to investigate the effects of government policy on venture capital backed investments. Giving up an alternative career, entrepreneurs focus their effort on a single, high risk venture each. Venture capitalists acquire an equity stake and...

The paper studies the effects of tax policy on venture capital activity. Entrepreneurs pursue a single high risk project each but have no own resources. Financiers provide equity finance. They must structure the entrepreneur's profit share and base salary to assure their incentives for full...