Entrepreneurship, Growth and Productivity with Bubbles

Entrepreneurship, growth and total factor productivity are larger when there is a financial bubble. We explain these facts using model with bubbles in which individuals face heterogeneous wages returns on productive investment. The heterogeneity the return of in- vestment separates between savers entrepreneurs. Savers buy assets, deposits or Entrepreneurs incur start-up cost borrow to invest capital. bubble provides liquidities credit-constrained These increase investment entrepreneurship start- up large enough, explains that can be bubbles. Finally, further increases more This occur correlated wages.