Entrepreneurship and Market Size - The Case of Young College Graduates in Italy

28 Pages Posted: 10 Aug 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)

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Date Written: August 9, 2010

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 0.2-0.3 percent. This result holds after controlling for regional fixed effects and is robust to instrumenting urbanization. Province’s competition, urban amenities and dis-amenities, cost of labor, earning differentials between employees and self-employed workers, unemployment rates and value added per capita account for 40 percent of the negative urbanization penalty. Our result cannot be explained by the presence of negative large-city differentials in returns to education either. In fact, 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 monthly income by 0.2-0.3 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 (August 9, 2010). CESifo Working Paper Series No. 3145. Available at SSRN: https://ssrn.com/abstract=1655630

Sabrina Lucia Di Addario

Bank of Italy ( email )

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Daniela Vuri (Contact Author)

University of Rome Tor Vergata ( email )

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IZA Institute of Labor Economics

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