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

24 Pages Posted: 8 Nov 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: November 8, 2010

Abstract

We analyse empirically the effects of urbanization on Italian college graduates’ work possibilities as entrepreneurs three years after graduation. We find that doubling the province of work’s population density reduces the chances of being an entrepreneur by 2-3 percentage points. This result holds after controlling for regional fixed effects and is robust to instrumenting urbanization. Provinces’ competition, urban amenities and dis-amenities, cost of labour, earning differentials between employees and self-employed workers, unemployment rates and value added per capita account for more than half of the negative urbanization penalty. Our result cannot be explained by the presence of negative differentials in returns to entrepreneurship between the most and the least densely populated areas either. In fact, as long as they succeed in entering the most densely populated markets, young entrepreneurs are able to reap-off the benefits of urbanization externalities: the elasticity of entrepreneurs’ net monthly earnings with respect to population density is 0:02-0:03.

Keywords: Labour 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 8, 2010). CEIS Working Paper No. 171. Available at SSRN: https://ssrn.com/abstract=1705746 or http://dx.doi.org/10.2139/ssrn.1705746

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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