Venture Capital and the Macroeconomy

80 Pages Posted: 13 Jan 2014 Last revised: 4 Mar 2019

See all articles by Christian C. Opp

Christian C. Opp

University of Pennsylvania - The Wharton School


I develop a model of venture capital (VC) intermediation that quantitatively explains central empirical facts about VC activity and can evaluate its macroeconomic relevance. The impact of VC-backed innovations is significantly larger than suggested by observed aggregate venture exit valuations, even after accounting for large exposures to systematic and uninsurable idiosyncratic risks. The risk properties of venture capital play a quantitatively important role in both explaining empirical regularities and shaping the value of ventures' contributions to economic growth. The model is analytically tractable and yields exact solutions, despite the presence of matching frictions, imperfect risk sharing, and endogenous growth.

Keywords: Venture Capital, Economic Growth, Innovation, Intermediation, Boom-Bust Cycles, Risk Premia, Uninsurable Idiosyncratic Risk

JEL Classification: G24, G12, O16, O31, O43

Suggested Citation

Opp, Christian C., Venture Capital and the Macroeconomy. Review of Financial Studies, Forthcoming. Available at SSRN: or

Christian C. Opp (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-573-3186 (Phone)

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