ENTREPRENEURIAL CULTURE, OCCUPATIONAL CHOICE AND TAX POLICY. Saibal Kar* Centre for Studies in Social Sciences, Calcutta, INDIA

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1 ENTREPRENEURIL CULTURE, OCCUPTIONL CHOICE ND TX POLICY Saibal a Cene fo Sudies in Social Sciences, Calcua, INDI nd Vivekananda Mukhejee Jadavpu Univesiy, Calcua, INDI Febuay 005 ddess fo Coespondence: Cene fo Sudies in Social Sciences, Calcua. R,.P. Township, Calcua , India. Ph Fa saibal@cssscal.og cknowledgemens: Saibal a is indebed o Woojin Lee fo helpful discussions. The usual disclaime applies. Eleconic copy available a: hp://ssn.com/absac084398

2 bsac This pape sudies he influence of enepeneuial culue among social goups in an economy. The culual faco deemines hei occupaional pefeences. We develop a model in which a concenaion faco has been used as a measue of business culue deemining he occupaional choice paens of ohewise idenical social goups. The occupaional disibuion of individuals fom diffeen goups is obained by compaing epeced uiliies fom employmen and enepeneuship. ased on he labo make oucomes he mean income and income vaiance of diffeen goups is calculaed. Individuals fom goups wih geae culual ais display highe elaive isk avesion wih a high income vaiance compaed o ohe goups. We popose a a- subsidy policy and obain condiions fo maimizing social uiliy. JEL Classificaion: D8, J3, H4. eywods: Enepeneuial culue, Self-employmen, Risk avesion, Income vaiance, Naional Income, Ta-subsidy Policy Eleconic copy available a: hp://ssn.com/absac084398

3 3. Inoducion The concep of culue is no only vey wide, bu i also lends iself o subsanial compleiy o vaious foms of social and economic insiuions. The vasness embedded in undesanding wha is mean by culue leads o a belief ha i is a nebulous concep. This is one of he easons why culue has been denied is due place in mos economic analyses of individual o goup behavio. Economic models, in paicula, avoid he inclusion of culual facos in eplaining make behavios o esponses on he gound ha culue iself is vey impecise. Howeve, geneally speaking, a non-quanifiable eogenous faco ofen posis significan eplanaoy powe behind a hos of economic and social phenomena. In many elaed wok, such esidual elemen has been ecognized as a culual faco fo eample, Landes, 998 and has also been quie useful fo compaing diffeenial gowh paens among counies o fo egions wihin a couny. Difficulies neveheless emain in incopoaing culue ino any analysis based on mehodological individualism Godley, 00, p.3. To quoe Godley 00, p. 3, How can culue be specified when i is ye o be saisfacoily defined? How can i be quanified if i emains vague and unclassified? Neveheless, hee eiss some effo in he lieaue o daw he links beween culue and economic gowh. The pesen sudy, on he ohe hand, uses culue as an impoan faco in individual decisionmaking. Individuals choose hei occupaional ypes based on hei culual backgounds. In fac, hee ae a numbe of culual facos acial beliefs, eligious See fo eample, Leibensein 978, Casson 99, Casson and Godley 000.

4 4 cusoms ec. ha affec an individual s decision. We, howeve, focus only on an individual s degee of 'business oienaion' as a culual ai deived fom he affiliaion o a especive economic goup. Essenially, his sudy has wo disinc puposes. Fis, we deemine he disibuion of wokes and self-employed individuals acoss economic goups wih vaying degees of business oienaions. Second, we popose a a policy, which maimizes social uiliy and addiionally, educes inegoup income dispaiy. The paallel lieaue o which we efe sholy, have made allusions o culual acial facos as influencing individualisic behavios. The pincipal moivaion behind his pape is inoducing a culual dimension in models of economic decisionmaking a a much moe genealized level. Moeove, hisoically speaking, individuals in many counies wee idenified in ems of hei family businesses, which in mos cases ook he fom of low-level self-employmen aciviies. The buches, he bewes, he capenes, o he usues have successfully mainained hei family o, in a moe aggegaive sense, communiy businesses fo ages. We ague ha alhough he iniial chaaceisics associaed wih especive pofessions have been significanly ansfomed, he iniial condiions could sill influence he choice of occupaion in a moden labo make. Howeve, fo elaing diecly o his phenomenon, we esic ou aenion o an analysis of goup behavio as agains individual-specific behavio influenced by he culual legacies. The es of he pape is sucued as follows. We pesen a bief inoducion o he elevan lieaue in secion and a model in secion 3. We popose a a-subsidy

5 5 policy in secion 4, whee he pupose is maimizing a social uiliy funcion. Secion 5 concludes.. Enepeneuial Culue One snapsho of he lae Vicoian economic hisoy of iain shall be quie useful as a fis sep owads idenifying economic goups wihin a couny and he muual aiude ha hey held agains each ohe. The enepeneuial decline in iain duing his peiod has been consideed he single mos conovesial episode on he elaionship beween economic behavio and culue. iain s enepeneus duing his peiod allegedly nuued ani-indusial culual values. Thee is some consensus ha iain s indusial epeience a he un of he cenuy was dominaed by inellecual salemae iby, 99. simila phenomenon was obseved in a numbe of ohe counies. Noably, in pos-independence 947 India, adical changes wee obseved in he shifing of indusial bases wihin he couny. eween 94 -, fo eample, he easen pa wih is base in Calcua hanessed he lages incease in capial invesmens fom Euopean, mied o puely Indian invesos. Towads he end of he fis half of he 0 h cenuy, he ansfe of powe fom iish govenmen o he Govenmen of India lead many eising Euopean fims o move hei businesses back oveseas. lenaively, hey sold off hei invesmens and ansfeed money oveseas. The void in he easen egion was quickly filled by businessmen migaing o his egion fom ohe pas of he couny mosly, Mawais fom Rajashan, a wesen povince of India. Gupa 99 eplains in deail why he indusial powe in he egion shifed away fom he

6 6 local enepeneus o hose migaing fom ohe egions. Indigenous peoples noion of occupaion ypes a he ime was he following, business is bad, ha he guy unning aound in a Mecedes-enz is unquesionably evil. Gupa, 99, p 07. On he ohe hand, inenally migaing minoiy enepeneus fom ohe egions evealed in an ineview conduced by Gupa 99, ha, hey have song desie o paicipae in business aciviies and oushine ohes. This value-cenic aiude owads economic decision-making can be eensive and enenched ino a whole communiy ove a susained peiod of ime. Gupa 99 seeks o find if his aiude led o an ea of indusial decay in his egion. One of he easons he cies is ha, while his egion of India, especially he povince of Wes engal idealized he inellecual life, ohe pas of India held up ohe caee goals. I is geneally believed ha, hee is a lo of family educaion in Mawai and Gujaai families indigenous of wo wesen povinces of India in developing enepeneuship skills. On he ohe hand, naives of he easen egion pomoe educaional achievemens and woking class bougeoisie culue. The pesen sudy invokes culue as a dominaing faco behind choice of occupaion. Howeve, mos sudies on he choice of occupaion among individuals have so fa been based on, diffeing individual abiliies Lucas, 978; Calvo and Wellisz, 980; Jovanovic, 98; ock and Evans, 986, diffeing degees of isk avesion ihlsom and Laffon, 979; anbu, 979, JPE, 989, oadway e al., 99, In ems of hei naive language, say Gujaai, and hei culual disance fom locally pevalen mass culue. Noe, culual specificaions hee, ae limied o mass culue and we ignoe oulies o diffeen culual enclaves wihin he mass culue.

7 7 Newman, 995, 3 3 capial make impefecions and liquidiy consains Evans and Jovanovic, 989; anejee and Newman, 993; oadway, 998; Ghaak and Jiang, 00, ec.. Essenially, a simple definiion of culue would be shaed values and beliefs Casson & Godley, 000, p.. This definiion allows sufficien maneuveing wihin he social sciences in geneal. I fis equally well wih he subjecivism ha undelies he economic heoy of aional choice. We build up a model in which a isk-avese individual compaes his/he uiliy in alenaive occupaions of isky self-employmen 4 and isk fee employmen and chooses he one ha yields a geae uiliy. This, howeve, is based on he posiion wihin he mass of populaion nomalized o and classified by goup ypes unifomly disibued ove a scale of elaive isk avesion. Thus, he goup s posiion, ahe han an individual s posiion is a much moe dominaing faco in his analysis and he disibuion of individuals by goups have been caused by hisoical o naual selecion o may well have been caused by acciden. Theefoe, an impoan elemen of his analysis is ha an individual s culual o goup ideniy maes no individual abiliies o individual isk avesion in he eane occupaional choice. Saed alenaively, we invesigae if occupaional choice of an individual could be an oucome of he cohesiveness o a paicula economic/social goup, when infomaion on paicula economic incenives do no odinaily flow 3 Some ohe sudies conside idenically isk- avese individuals: eamples being ppelbaum and az, 986, Rees and Shah, 986, a, 004, ec. 4 Self-employmen can be defined in a numbe of ways. nigh 9, Schumpee 934, izne 973, Lucas 978, and Casson 98 among ohes have defined enepeneuship. Fo he heoeical model we develop in ou sudy, an enepeneu o a self- employed individual is a hybid of all possible definiions.

8 8 acoss goups. The souce of asymmey hee, is heefoe, he eisence of goupspecific infomaion ha ohe goups do no odinaily have access o. This culual o ehnic ai also significanly eplains enepeneuial paens in ohe counies, alhough he acial chaaceisics dominae he goup fomaion. Hou and Rosen 000 noably, find ha among blacks and Hispanics in he US, popensiy o move ino business venues is lowe han whies and sians. 5 Ohe han ha, aes 995, 997, Failie 996 find ha lowe levels of asses, lowe pobabiliies of having a self-employed fahe and less pas epeience in self-employmen lagely eplain low enepeneuial paicipaion by blacks. 6 Fuhe, wih espec o immigans opeaing businesses in he US and ohe indusialized counies, a culual faco seems o be in opeaion. onacich and Modell 98 emphasized he pesence of hif and co-opeaion p.45 based on culual and acial chaaceisics among Japanese immigans in he US duing he pe- Wold Wa II ea, in lagely faciliaing hei business venues. 7 In simila sudies aes, 997; ojas, 987, LaLonde and Topel, 99; Funkhouse and Tejo, 995; Yuenge, 995; Ligh, 985; Duleep and Reges, 997, he noion of culual ais obseved a he souce of immigaion is used as cucial infomaion in undesanding 5 Even having self-employed fahes do no push sufficien numbe of black meicans ino selfemploymen. Hou and Rosen, 000. Many black households ae dominaed by self-employed mohes, which do no affec favoably he choice of self-employmen by men Holz-Eakin e al., We use hese empiical obsevaions o capue ina-family feaues as a culual elemen in ou model. 7 mong many ohe immigan goups, oean-meican men and women wih simila culual backgound as Japanese have self-employmen aes of 7.9 and 8.9 pecen, especively Failie, 996. Ohe goups wih vaying culual backgounds bu having high business epesenaions ae Sweedish, Geeks, Lebanese, ec. esides, Chinese enclaves fom a vey special ype of business se-up. Godley, 00.

9 9 he choice of occupaion. ccoding o his view, enepeneuial behavio of immigans is molded in he couny of oigin o by hei culual backgound. 8 In he model we pesen ne, occupaional pefeences facing all equally iskavese individuals disibued unifomly ove he populaion ae limied o employmen and self-employmen. While employmen means woking fo a fim o an individual a a given wage ae wage is eogenous in ou model, enepeneuship/ self employmen efes o individuals hose ean no wage o salay, bu deive hei income by eecising hei pofession o business on hei own accoun and/o fo hei own isk De Wi, 993, p.. 3. The Model Thee ae wo goups of naives in a couny, and. The oal populaion of he couny is uniy. The numbe of individuals belonging o goup is, while hose in goup is, such ha. 9 The labo make poduc of all individuals is and he woke eceives a eun equivalen o he poduc. Individuals ae no diffeeniaed accoding o skill ypes. 0 Le π be he popoion of individuals in goup who ae employed as opposed o being self-employed in equilibium. Theefoe, he acual numbe of goup individuals who ae employed is calculaed as, π, whee π is he equilibium value ofπ. 8 Yuenge 995 esimaes a wo-seco model of immigan eanings. I suppos ha immigans fom counies wih lage self-employmen secos display highe self-employmen aes in he hos couny. 9 We assume ha is eogenously deemined. 0 Inoducing skill heeogeneiy would complicae he model wihou poviding any addiional infeences o ou ends.

10 0 Now, if an individual chooses self-employmen, hee is a fied pemium ove his/he poduc in he labo make. Ohe han ha, le ε be a andom eun fom self-employmen. We assume a unifom disibuion fo ε, g ε, fo ε [ z, z]. Looked a alenaively, is he mean eun o he self-employed, as agains eaned by individuals who insead choose employmen. ny such individuals who choose o be self-employed in equilibium wihin o ouside special goups face a consan elaive isk avesion uiliy funcion, Uε -. In ou model, is he degee of elaive isk avesion of an individual. Individuals have a von Neumann-Mogensen uiliy funcion chaaceized by a measue of elaive isk avesion as unde ow-pa 965 and [0,] individuals ae disibued unifomly ove a scale of elaive isk avesion, which. Fuhe, implies ha follows a unifom densiy funcion. Le be he level of elaive isk avesion a which an individual is indiffeen beween employmen and selfemploymen. This chaaceizes he maginal individual who is indiffeen beween employmen and self-employmen, as long as he epeced uiliy fom self-employmen is equal o he make-cleaing wage,. Thus, individuals wih > choose employmen, while hose wih < choose self-employmen. ccodingly, he equilibium value of π is deemined once is deemined. Since he populaion is unifomly disibued ove elaive isk avesion, π. This solves fo he I may be agued ha pesence of ' ' would push all individuals o self-employmen, as hee is a posiive eun fom self-employmen unde all saes. Howeve, if ' ' is inepeed as he psychological eun fom auonomy, dominance ec. see Lazea and Mooe, 984; Seon and owman, 985, p. 3, hen he eisence of ' ' can be a feaue among a goup of isk-avese individuals. This endes he pesen appoach diffeen fom ohe models of self-selecion in he labo make. The equilibium is independen of disibuion of individuals abiliies o degee of isk avesion.

11 equilibium level of employmen convesely, self-employmen fo individuals, subsequenly. While he above discussion peains o he behavio of an individual, he poin in focus is how he affiliaion o a special goup influences he choices. This engendes classificaion of he goups accoding o he special aibues. Le us begin wih goup individuals, who do no have he special chaaceisics he business oienaion. The uiliy funcion fo self-employed individuals in goup is given by, U ε The epeced uiliy EUSE fom self-employmen when g ε follows a unifom disibuion, is EUSE ε dε z I follows ha he lowe he degee of maginal elaive isk avesion, he highe he EUSE epeced uiliy fom self-employmen, < 0 On he ohe hand, he uiliy fom employmen is given by, U 3 Compaing he epeced uiliies fom 3 and 4 solves fo [poin M in Fig ]. Fo goup i shows ha all individuals disibued wih a elaive isk avesion geae han he ciical ae, >, would be employed, wheeas hose wih < would be self-employed in equilibium.

12 Thus wihin goup, π ae employed in equilibium, such ha he acual numbe of employed is π. EUSE U M N U EUSE EUSE Figue. Deeminaion of ciical elaive isk avesion fo goup and. The oal income of goup is he sum of eanings fom self-employmen and wages: such ha, ε dε 4 z 5 Ne, conside individuals in goup. They shae a culual o acial ai favoable o enepeneuship. The individuals in his goup eceive a highe eun fom enepeneuship based on his culual aibue. Such eun inceases wih he

13 3 locaional alenaively, cheap and easy flow of infomaion ove spaially sepaaed membes of he goup concenaion of hei fellow ype individuals. 3 Locaional concenaion povides easy disseminaion of specific infomaion acoss individuals of his goup. I may also be inepeed as a goup suppo in he fom of infomaion, capial o echnical advice made available o he business enans of his goup by aleady eising business esablishmens. I may also ake he fom of easy availabiliy of cedi. 4 Saed alenaively, eisence of family membes o fellow goup membes wih simila business epeiences can aise he epeced euns fo new enans, as long as hee is posiive eenaliy fom shaing he infomaion wihin he goup. Denoe such eun by y, whee k is an eogenous consan. 5 Clealy, smalle he size of his special goup, smalle is he eun. On he ohe hand, if k is low say, <, inceasing he goup size educes he eun fom goup affiliaion. Even if k 0, euns fom being in he paicula goup, howeve small, is posiive. Theefoe, fo a given k hee is an opimum goup size which geneaes posiive d EUSE euns fom goup affiliaion. This is obained a he poin whee, 0. d Fo goup, le be he ciical degee of elaive isk avesion. Popoion of 3 Use of concenaion faco is a mehodological poposiion fo measuing impac of business culue on choice of occupaion. diffeen ype of goup fomaion may be found in immigan enclaves ojas, 986 whee locaion-based cohesiveness plays a cucial ole. In he pesen pape geogaphical poimiy does no have o be cucial as long as infomaion flows smoohly. 4 Cheap cedi may be available o new enans of he same goup owing o he advanage of ina-goup pee monioing. So, lage is he size of goup, geae is he help eceived by hose who ae pa of his goup, whehe a poenial enepeneu o no. 5 In ealiy, he goups have a vaying degee of business oienaion. Suppose hee ae a finie numbe of goups, each wih an epeced eun fom business oienaion. I is given by i i, i,, C. Fo goup in ou case, i 0, while fo goup, i is > 0. i

14 4 populaion belonging o goup and disibued above he ciical level would hen be, π. π is he popoion of individuals woking in equilibium since hei elaive isk avesion eceeds he ciical level. s befoe, he acual numbe of individuals fom goup woking in equilibium is β π. The numbe of goup individuals self-employed in equilibium is given by. The ciical elaive isk avesion fo goup is similaly obained by compaing epeced uiliies fom self-employmen and employmen: he uiliy fom selfemploymen being and he epeced uiliy: U ε 6 EUSE z { ε} dε 7 On he ohe hand, uiliy fom employmen is: U 8 Poin N in Fig depics equilibium fo goup. Evidenly, > owing o he pesence of a posiive eun fo goup : y. The mean income of his goup is hen, y ε dε 9 z simplificaion of he above fom yields,

15 5 [ ] 0 ased on he above discussion we offe he following poposiion. Poposiion : Individuals affiliaed o special economic goups display geae elaive isk avesion and ean highe aveage income compaed o ohes by viue of goup fomaion. 4. Ta-Subsidy Policy We popose a a-subsidy policy as in anbu 98. I follows fom secion 3 ha alhough individuals ae homogeneous in ems of skill abiliy and isk pefeence hei choice of occupaion is deemined by pivae infomaion of he goup o which hey belong. In his paicula eample, moe individuals fom goup ae epesened in enepeneuship/ self-employmen compaed o ha fom goup. Fom a social goup s pespecive, his asymmey in occupaional disibuion is cucial. Vaiaion in self-employmen-o-employmen aio acoss goups leads o beween-goup income gaps, which canno be compensaed fo wihou access o such goup specialies. Compaing equaions 5 and 0, one can calculae he diffeence in aveage incomes beween goup / and /. Thus >, since, >0, > 0 and > 0. is possible only when, 0, implying eveybody is employed unde all condiions. Individuals fom goup, wih a highe epesenaion in self-employmen hus

16 6 enjoy a highe aveage income ove individuals fom goup. The policy poposiion peains o devising a suiable a-subsidy policy such ha a edisibuion of income fom wokes o enepeneus maimizes social uiliy. Now, whehe ha educes income gaps beween goups depends on he elasiciy of elaive isk avesion acoss goups o he poposed a-subsidy policies. The social uiliy is defined as he sum of he aggegae uiliy levels fo goup and goup, Ω σ σ Ω, whee, d U ε ε σ and d U ε ε σ Reaanging, he pe-a-subsidy social welfae of he economy is given by, ]} [ ] [ { Ω σ σ Suppose, a popoional a is imposed on wokes fom boh goups and he enepeneus fom boh goups ae subsidized wih he help of he poceeds. Thee is no collecion cos o se-up cos and he budge is balanced. popoional a on wage lowes income fom o -, being he a ae. On he ohe hand, a popoional subsidy shifs EUSE as in fig. and EUSE o he igh, subjec o a maginal

17 7 6 incease in income by s, whee, s is he ae of popoional subsidy. EUSE U - M N U U- EUSE EUS E EUS E EUSE, Figue. Pos a-subsidy ciical elaive isk avesion fo goup and. Theefoe, a popoional a on wokes and popoional subsidy o enepeneus inceases he ciical elaive isk avesion fo boh goups and. The new ciical elaive isk avesion poins ae given by and. Clealy, ae of self-employmen fo boh goup inceases and ae of employmen fo boh goup falls and i is 6 Thee ae wo impoan consideaions hee. Fis, if he govenmen aes wokes wihou subsidizing he enepeneus, ha by iself changes he self-employmen-o employmen aio in favo of he fome. Second, disibuion of subsidy may no be equal acoss boh goups. Thee can be vaious combinaions beween goups in he way subsidy is disbused. One goup may ge a highe popoion, while he ohe goup ges less. lenaively, he a evenue may be used o se-up business schools o business infomaion hubs wih geae access fo epesenaives of non-business goups. Even, individuals fom non-business goups may ge access o cheape cedi fom financial insiuions as pa of subsidy package, if no a diec popoional subsidy. lso, he developing counies wih less han popoionae o populaion gowh job ceaion ae has epeimened wih vaious self-employmen geneaion schemes o ease ou he unemploymen poblem, eceiving mied esponse.

18 8 deemined by equaing he pos-a and pos-subsidy uiliies fom employmen and self-employmen fo boh goups. Fo eample, individuals fom goup now compae: } { d s ε ε Similaly,,,,. s noed ealie, he objecive of he govenmen is o choose a a/subsidy ae, which maimizes social uiliy. We assume a fully afinanced subsidy scheme, such ha he ne evenue is zeo. Thus, d d s T 0 }] { } { [ ] [ ε ε ε ε Solving fo s, ] [ s 3 ccodingly, he pos-a-subsidy uiliy funcions facing goup and goup ae wien as, d s U ε ε σ } { and d s U ε ε σ } { Thus he pos a-subsidy social uiliy is,

19 9 ]} [ ] [ { s s Ω σ σ 4 Equaions and 4 povide condiions unde which social welfae inceases. In ohe wods, social welfae inceases if, 0 Ω > Ω, fo a suiable choice of. Thus, ]} [ ] [ { ]} [ ] [ { } { s s Ω Ω 5 In ode o find he opimal a ae, we subsiue s fom 3 in 5,

20 0 ]} [ ] [ { ]} [ ] [ { } { Ω Ω 6 nd obain fom 0 Ω Ω. The second-ode condiion may be veified fom 0 < Ω Ω This solves fo,,,, k. We do no ule ou he possibiliy of muliple soluions. In he even of muliple soluions, he govenmen chooses a paicula a ae based on a subsequen objecive: ha educes he income gap beween social goups. Fo his, we compae he elasiciy of pos a-subsidy ciical elaive isk avesion of goup and o a small change in. Le us suppose ha he govenmen wans o educe he aveage income gap beween goup and in favo of he fome. Thus choose a a ae, such ha, > 7 In ohe wods, choice of a a ae is limied o he case whee he elasiciy of ciical

21 elaive isk avesion fo goup is geae han ha of goup. The a ae should be so chosen ha, following a small change in he a ae individuals in goup eacs moe compaed o hose in goup. s a esul, in he pos-a egime a elaively highe pecenage of individuals fom goup would ene he self-employmen caegoy compaed o ha fom goup. s self-employmen eanings eceed eanings fom employmen, his inceases he aveage income of goup. lhough, he aveage income of goup also inceases, he pecenage change fo his is lowe han ha of goup s. ased on he above analysis we offe he following poposiion: Poposiion : popoional a-subsidy policy incease social uiliy and educes ine-goup income dispaiy if he elasiciy of elaive isk avesion o changes in a aes is geae fo individuals in goup. 5. Concluding Remaks In his pape, we sudy he influence of goup-based culue on he occupaional choice of individuals. eween wo goups of individuals, one goup nuues a woking class culue while he ohe goup has a song enepeneuial culue, despie simila abiliies and isk-pefeence acoss goups. Measuing he impac of culue is no easy in an economic cone. The eun fom culual ais is capued by he individual s cohesiveness o a goup of individuals who have song enepeneuial acumen. The eun maeializes hough access o infomaion, o easie access o capial, o ideas o make conceps ha emain pivae infomaion fo he specific

22 goup. Individuals fom a ceain goup enjoy his benefi compaed o individuals belonging o he ohe goup. We show ha his enepising goup of individuals displays highe ciical elaive isk avesion and ha a lage popoion of he populaion enes business. The aveage income accuing o individuals of his goup eceeds ha eaned by individuals fo he ohe goup. The ine-goup income dispaiy ha esuls fom such occupaional choice paen may be coeced by using a suiable a-subsidy policy. The a policy may also be used o aise he level of social welfae. The policy implicaions of his pape ae saighfowad. Fo an undeepesened goup in business, a subsidy would push a lage popoion of individuals o a isky alenaive. The impoance of his consuc lies no on he fac ha a a-subsidy policy inceases popoion of enepeneus fom a goup, bu ha i acs as a subsiue fo a culual ai and even as a second-bes, i may incease social welfae. n alenaive o he diec subsidy scheme could be he esablishmen of an infomaion hub fo he disadvanaged goup, which may include fee counseling o business aining. This definiely has ohe geneal equilibium implicaions fo he economy ha may be compaed agains he policy poposed hee.

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