Why do individuals become entrepreneurs? Why do some succeed? We propose two theories in which information frictions play a central role in answering these questions. Empirical analysis of two national longitudinal samples reveal the following patterns: (i) entrepreneurs have higher ability than...

We develop a formal model to understand the selection and influence effects of social proximity between business partners. Consistent with the model’s predictions, we find that US venture capitalists (VCs) are more likely to select startups with coethnic executives for investment, particularly...

Educational tracking seeks to group students by unobserved ability using measures of observable acquired skills. In a model where individuals have differential skills prior to beginning formal education due to differences in early childhood development (e.g. linguistic, cultural, or nutritional...