Working Paper: NBER ID: w25112
Authors: Shai Bernstein; Emanuele Colonnelli; Davide Malacrino; Timothy McQuade
Abstract: We examine the characteristics of the individuals who become entrepreneurs when local opportunities arise. We identify local demand shocks by linking fluctuations in global commodity prices to municipality-level agricultural endowments in Brazil. We find that the firm creation response is mostly driven by young and skilled individuals. The characteristics of these responsive entrepreneurs are significantly different from those of average entrepreneurs in the economy. By structurally estimating a novel two-sector model of a local economy, we highlight how the demographic composition of the local population can significantly affect the entrepreneurial responsiveness of the economy.
Keywords: entrepreneurship; local demand shocks; commodity prices; Brazil; firm creation
JEL Codes: E26; J24; L26; O12; O13; O17; O20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increases in global commodity prices (F69) | local demand shocks (R22) |
| local demand shocks (R22) | local employment (J68) |
| local demand shocks (R22) | aggregate income (E10) |
| local demand shocks (R22) | firm entry (M13) |
| Increases in global commodity prices (F69) | local employment (J68) |
| Increases in global commodity prices (F69) | aggregate income (E10) |
| local demand shocks (R22) | firm creation response by individuals under 30 (L26) |
| individual skills (J24) | firm creation response (L26) |
| demographic composition (J11) | entrepreneurial responsiveness (L26) |
| aging populations (J11) | decline in entrepreneurial responsiveness (L26) |