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

See all articles by Sabrina Lucia Di Addario

Sabrina Lucia Di Addario

Bank of Italy

Daniela Vuri

University of Rome Tor Vergata; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Multiple version iconThere are 6 versions of this paper

Date Written: November 1, 2009

Abstract

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

Di Addario, Sabrina Lucia and Vuri, Daniela, Entrepreneurship and Market Size: The Case of Young College Graduates in Italy (November 1, 2009). Centro Studi Luca d'Agliano Development Studies Working Paper No. 280. Available at SSRN: https://ssrn.com/abstract=1619825 or http://dx.doi.org/10.2139/ssrn.1619825

Sabrina Lucia Di Addario (Contact Author)

Bank of Italy ( email )

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Daniela Vuri

University of Rome Tor Vergata ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Munich, DE-81679
Germany

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