Milo Bianchi

Liquidity, Risk, and Occupational Choices

We explore which financial constraints matter the most in the choice of becoming an entrepreneur. We consider a randomly assigned welfare program in rural Mexico and show that cash transfers signi cantly increase entry into entrepreneurship. We then exploit the cross-household variation in the timing of these transfers and find that current occupational choices are significantly more responsive to the transfers expected for the future than to those currently received. Guided by a simple occupational choice model, we argue that the program has promoted entrepreneurship by enhancing the willingness to bear risk as opposed to simply relaxing current liquidity constraints.

Financial Development, Entrepreneurship, and Job Satisfaction

This paper shows that utility differences between the self-employed and employees increase with financial development. This effect is explained not by increased profits but by an increased value of nonmonetary benefits, in particular job independence. We interpret these findings by building a simple occupational choice model in which financial constraints may impede the creation of firms and depress labor demand, thereby pushing some individuals into self-employment for lack of salaried jobs. In this setting, financial development favors a better matching between individual motivation and occupation, thereby increasing entrepreneurial utility despite increasing competition and so reducing profits.

Immigration and Crime: An Empirical Analysis

In this paper we examine the empirical relationship between immigration and crime across Italian provinces during the period 1990-2003. Drawing on police data, we first document that the size of the immigrant population is positively correlated with the incidence of property crimes and with the overall crime rate. We then use instrumental variables based on migration towards other European countries to identify the causal impact of exogenous changes in the immigrant population of Italy. According to these estimates, immigration increases only the incidence of robberies and has no effect on all other types of crime. Since robberies represent a very small fraction of all criminal offences, the effect on the overall crime rate is not significantly different from zero.

Bubbles and Crashes with Partially Sophisticated Investors

We analyze bubbles and crashes in a model in which some investors are partially sophisticated. While the expectations of such investors are endogenously determined in equilibrium, these are based on a coarse understanding of the market dynamics. We highlight how such investors may endogenously switch from euphoria to panic and how this may lead to equilibrium bubbles and crashes even in a purely speculative market in which information is complete and it is commonly understood that the bubble cannot grow forever. We also show how this setting can match stylized empirical facts, and we investigate whether bubbles may last longer when the share of fully rational traders increases.

Ambiguity Preferences and Portfolio Choices: Evidence from the Field

We match administrative panel data on portfolio choices with survey data on preferences over ambiguity. We show that ambiguity averse investors bear more risk, due to a lack of diversification. In ...