Working Paper: CEPR ID: DP14638
Authors: Vicente Bermejo; Miguel Ferreira; Daniel Wolfenzon; Rafael Zambrana
Abstract: The Spanish Christmas Lottery is the largest lottery worldwide. We exploit local windfall gains arising from lottery prizes to estimate the effect of income on entrepreneurship. We find higher firm creation and greater self-employment in winning provinces. Our estimates imply that 46 firms are created for every €1,000 increase in disposable income per capita. The effect occurs in both non-tradable and tradable industries, and is more pronounced in regions with poorer access to finance. Firms created in winning provinces are larger, create more value-added, and are more likely to survive. These results suggest that local income and financial development are important drivers of entrepreneurship.
Keywords: entrepreneurship; firm creation; aggregate income; local demand; financial development; self-employment; public policy
JEL Codes: D14; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Winning provinces (N41) | Increase in firm creation (L26) |
| Lottery winnings (H27) | Increase in disposable income (D12) |
| Increase in disposable income (D12) | Increase in firm creation (L26) |
| Income shock (G59) | Higher self-employment growth (J23) |
| Income shock (G59) | Increase in entry rate of new firms (L26) |
| Lottery income shocks (H27) | Entrepreneurship (M13) |