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Title: Big effects of a little sector : the structural effects of venture capital on the macroeconomy
Author: Woolley, Nicholas
ISNI:       0000 0004 6346 4240
Awarding Body: University of Oxford
Current Institution: University of Oxford
Date of Award: 2015
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We explore certain structural elements of venture capital investment, focusing on the role of venture capital as an asset class dedicated to technology investment. The structural role of technology as contributing to the total factor productivity is captured through the use of endogenous growth mechanisms as found in Romer (1990) and Rivera-Batiz and Romer (1991). In the first chapter, we explain certain elements of the two recessions in the first decade of the 21st century by combining these endogenous growth mechanisms with a financial accelerator in the market for production capital to capture the financial elements associated with decreased leverage after a financial crisis. In the second chapter, we assess the impact of policies in the late 1970s which largely created venture capital by encouraging technology investment to occur through debt contracts rather than equity contracts. We explain a set of stylized facts by contrasting a debt mechanism and an equity mechanism for an asset that derives its value from returns to technology goods in a stochastic endogenous growth model. Our final chapter deals with the disposition of venture capitalists towards Knightian uncertainty. We show that an uncertainty-loving behavior of venture capitalists leads to a Pareto improvement in the economy. However, the magnitude of the effect of changes in disposition towards uncertainty is small, implying that bubbles in the venture capital market caused by this type of uncertainty-loving behavior should not be a great concern for investors and policy makers.
Supervisor: Ellison, Martin Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Venture capital ; Economic development ; Financial crises ; Macroeconomics