Congratulations to Professor Sangeeta Pratap, whose article “An Estimated Structural Model of Entrepreneurial Behavior” with John Jones will be forthcoming in The American Economic Review, Volume 110, Issue 9 September 2020!
- Professor Pratap’s study uses data on owner-operated New York dairy farms.
- The authors formulate a dynamic model of farms facing uninsured risks and financial constraints.
- They find that financial factors and nonpecuniary benefits are of first-order importance.
- Collateral constraints and liquidity restrictions inhibit borrowing and the accumulation of capital, especially among high productivity firms seeking to expand.
- The nonpecuniary benefits to farming are large and keep small, low-productivity farms in business.
- Although farmers are risk averse, eliminating uninsured production risk has only modest effects on capital and output.
