Entrepreneurship and Market Size: The Case of Young College Graduates in Italy
Centro Studi Luca d'Agliano Development Studies Working Paper No. 280
25 Pages Posted: 4 Jun 2010
Date Written: November 1, 2009
We analyze empirically the effects of urban agglomeration on Italian college graduates’ work possibilities as entrepreneurs three years after graduation. We ﬁnd that each 100,000 inhabitant-increase in the size of the individual’s province of work reduces the chances of being an entrepreneur by 0.2 percent. This result is robust to controlling for regional ﬁxed effects and to instrumenting urbanization with three different sets of instruments. However, a positive urbanization externality emerges after taking into account urban amenities and dis-amenities, and, above all, provinces’ competition and cost of labor. In this case, every 100,000 inhabitant increase raises the chance of entrepreneurship by 2.4 percent. Finally, as long as they succeed in entering the largest markets, young entrepreneurs are able to reap-off the beneﬁts of urbanization externalities: every 100,000-inhabitant increase in the province’s population raises entrepreneurs’ net hourly income by 0.2 percent.
Keywords: Labor market transitions, Urbanization
JEL Classification: R12, J24, J21
Suggested Citation: Suggested Citation