Abstract: Abstract This paper explores how financial intermediation costs affect occupational choices, using a model with employers, own-account workers, and wage workers. An intermediation cost drives a wedge between the return on saving and the cost of borrowing that increases the cost of borrowing, reduces the return on saving, and depresses the wage rate. As a novel channel in this paper, a lower return on saving induces agents to seek self-employment to manage their wealth. Quantitatively, the observed variation in the intermediation cost explains a...
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Topics: 
Labour economics
Monetary economics