Calculate the threshold wage w that leaves a credit

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Consider the dual market model based on Ghatak and Jiang (2002) with the following modification: The entrepreneurial technology requires one entrepreneur and two workers. Suppose that w= 15, r= 0.1, I= 150, q=135, π= 0.1, F= 100. Suppose that 40% of the population have asset holdings a= 400 and the remaining 60% of the population a =250.

a) Calculate the threshold wage w that leaves a credit constrained individual indifferent between becoming a worker and self-employed

Reference no: EM133079889

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