Social Interactions and Entrepreneurial Activity
Posted: 12 Mar 2009
Date Written: March 11, 2009
We show that individuals residing in highly entrepreneurial neighborhoods are more likely to become entrepreneurs and invest more into their own businesses, even though their entrepreneurial profits are lower and their alternative job opportunities more attractive. Our results suggest that peer effects create non-pecuniary benefits from entrepreneurial activity and play an important role in the decision to become an entrepreneur. Alternative explanations, such as entry costs, social learning, and informal credit markets, are not supported by the data.
Keywords: Private benefits, peer effects, social norms, social learning
JEL Classification: M13, G31, J24, Z13, R12
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