A simple occupational choice model is used to predict that entrepreneurs who found new firms are more likely to work for small than for large firms prior to start-up. The mechanism underlying the result is heterogeneous risk aversion. The model also predicts a positive association between new...

This paper models the distribution of firm sizes as the market equilibrium from occupational choices made by rational individuals with different entrepreneurial skills. The model is calibrated to match Spanish data on the size of occupational groups (employees, employers, solo self-employed) and...