This paper investigates the role of human capital acquisition for growth and inequality. We
construct an overlapping generations model of occupational choice in the presence of borrowing
constraints that allows for (i) investment in human capital during youth (schooling) and (ii)
entrepreneurial entry, exit, and investment decisions. The focus of our analysis is on the role
of borrowing constraints in determining human capital and entrepreneurship. We analyze how
different levels of financial development jointly determine human capital investments and the
productive structure of the economy. Our model is consistent with observable correlations at
the microeconomic level between wealth, education, talent and occupational choices. We find
that economies that undergo financial reforms experience very protracted transitional dynamics.