Location and Entrepreneurship: Insights from a Spatially‐Explicit Occupational Choice Model with an Application to Chile

29 Pages Posted: 6 Sep 2017

See all articles by Félix Modrego

Félix Modrego

affiliation not provided to SSRN

Philip McCann

University of Waikato - Population Studies Centre

William Foster

Pontifical Catholic University of Chile - Department of Agricultural Economics

M. Rose Olfert

University of Saskatchewan - College of Agriculture - Agricultural Economics

Date Written: September 2017

Abstract

Occupational choice and heterogeneous managerial ability enter a spatial Dixit‐Stiglitz setting, linking location, wages and regional entrepreneurship rates. Market potential has a positive partial effect and wages a negative partial effect on the regional supply of entrepreneurs, both balancing in equilibrium with endogenous wages. Market potential increases profits, but also the opportunity cost of entrepreneurship. In the long‐run equilibrium with perfect mobility, the cut‐off level of ability determining selection into entrepreneurship will be the same across regions; moreover, regional differences in entrepreneurship rates depend only in differences in average fixed costs of firms. An empirical application is provided for Chile.

Suggested Citation

Modrego, Félix and McCann, Philip and Foster, William and Olfert, M. Rose, Location and Entrepreneurship: Insights from a Spatially‐Explicit Occupational Choice Model with an Application to Chile (September 2017). Journal of Regional Science, Vol. 57, Issue 4, pp. 669-697, 2017, Available at SSRN: https://ssrn.com/abstract=3031040 or http://dx.doi.org/10.1111/jors.12323

Félix Modrego (Contact Author)

affiliation not provided to SSRN

No Address Available

Philip McCann

University of Waikato - Population Studies Centre ( email )

Hamilton
New Zealand

William Foster

Pontifical Catholic University of Chile - Department of Agricultural Economics ( email )

Av Libertador General Bernardo O'Higgins 340
Santiago, Región Metropolitana 8331150
Chile

M. Rose Olfert

University of Saskatchewan - College of Agriculture - Agricultural Economics ( email )

51 Campus Drive
Saskatoon, SK S7N 5A8
Canada

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