International Trade, Foreign Investment, and the Formation of the Entrepreneurial Class / Gene M. Grossman.

Format:

Book

Author/Creator:

Grossman, Gene M.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1174.

NBER working paper series no. w1174

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1983.

Summary:

In this paper, I examine the argument that free trade may be harmful to less developed countries, because such international competition inhibits the formation of a local entrepreneurial class.I view the entrepreneur as the manager of the industrial enterprise, as well as the agent who bears the risks associated with industrial production. A two-sector model of a small open economy is developed in which the size of the entrepreneurial class is endogenous.It is shown that the entrepreneurial class is smaller under free trade than would be first-best optimal in the presence of efficient risk-sharing institutions such as stock markets. Nonetheless, there are potential gains from trade, and any protectionist policy that increases the number of entrepreneurs will have deleterious welfare consequences.

Notes:

Print version record

August 1983.