The choice between civil service and entrepreneurship in the presence of credit rationing

Abstract

ABSTRACTThis article examines the role of opportunities to be civil servants in determining both an individual’s ability to borrow to be an entrepreneur and his career choices that are related to the endowment of wealth. It is assumed that the civil servants are hired to produce the public goods or services that benefit all the entrepreneurs hiring workers to produce private goods. In considering the case where the position of a civil servant is randomly up for grabs without rent-seeking, it is known that the effect of a rise in the number of civil servants to be hired on an individual’s ability to borrow is mainly based on the improved efficiency and a rise in the wage due to an increase in the demand for workers. When the position of a civil servant is secured through rent-seeking, it is found that an improvement in the financial environment will lower the cost of rent-seeking if the welfare of the civil servant is not too high.