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...

Venture capitalists provide risk capital and valuable monitoring services that are essential for the success of upstart companies. The financial sector’s expertise in monitoring investment proposals may increase with the accumulated experience in funding such projects. In the other direction,...