Enterprise, inequality and economic development

We characterize an equilibrium development process driven by the interactio n of the distribution of wealth with credit constraints and the distributio n of entrepreneurial skills. When efficient entrepreneurs are relatively ab undant, a "traditional" development process emerges in which the evolution of macroeconomic variables accord with empirical regularities and income in equality traces out a Kuznets curve. If, instead, efficient entrepreneurs a re relatively scarce, the model generates long-run "distributional cycles" driven by the endogenous interaction between credit constraints, entreprene urial efficiency and equilibrium wages.