Entrepreneurship and the macroeconomy.

Abstract

This thesis focuses on entrepreneur as an owner of a privately held business. As the name "privately held" suggests, there are no readily available markets for trading risks associated with entrepreneurs' investments in their businesses. On the contrary, investments in publicly traded companies provide opportunities for diversification of risks through trade in public equity markets. I study the characteristics of these alternative investments and their effect on decisions of entrepreneurs to invest in a portfolio of private and public equities. First, I compare empirically returns to an index of all non-traded entrepreneurial equity and to an index of publicly traded equity in the United States. Second, I study the aggregate effects of improving investment conditions in public equity markets through their influence on entrepreneurs' individual portfolio decisions. I provide explicit quantitative measures of associated changes in the welfare of entrepreneurs and levels of aggregate economic activity using data from Ecuador and Chile.