Publication Type
Journal Article
Version
submittedVersion
Publication Date
6-2020
Abstract
I estimate a matching model of business‐partnership formation to quantify the relative importance of productivity gains, financing gains, and the coordination failure of effort provision (moral hazard) among partners. Productivity gains account for 61% of the gain from the observed partnerships. For partners in the first quartile of the wealth distribution, however, financing accounts for 93% of the gain. The cost of moral hazard corresponds to 42% of the entire gain from partnerships. A loan policy specifically targeting partnerships is less effective in improving welfare than a conventional loan policy that provides loans to individual entrepreneurs.
Keywords
Partnership, productivity, financial constraints, moral hazard, entrepreneurship, matching
Discipline
Entrepreneurial and Small Business Operations | Finance | Industrial Organization
Research Areas
Applied Microeconomics
Publication
RAND Journal of Economics
Volume
51
Issue
2
First Page
531
Last Page
562
ISSN
0741-6261
Identifier
10.1111/1756-2171.12324
Publisher
Wiley
Citation
LEE, Jungho.
Estimating the benefits and costs of forming business partnerships. (2020). RAND Journal of Economics. 51, (2), 531-562.
Available at: https://ink.library.smu.edu.sg/soe_research/2071
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/1756-2171.12324
Included in
Entrepreneurial and Small Business Operations Commons, Finance Commons, Industrial Organization Commons