We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm size distribution. As entrepreneurial firms can grow only slowly and rely heavily on retained earnings to expand the size of their business in this set-up, we show that,...

"Although the role of financial constraints on entrepreneurial choices has received considerable attention, the effects of these constraints on aggregate capital accumulation and wealth inequality are less known. Entrepreneurship is an important determinant of capital accumulation and wealth...