Who Creates New Firms When Local Opportunities Arise?
70 Pages Posted: 21 Mar 2018 Last revised: 5 Feb 2019
Date Written: February 2, 2019
We examine the characteristics of the individuals who become entrepreneurs when local opportunities arise. We identify local demand shocks by linking fluctuations in global commodity prices to municipality level agricultural endowments in Brazil. We find that the firm creation response is almost entirely driven by young and skilled individuals. Their response is larger in municipalities with better access to finance and more skilled human capital, and is driven entirely by the formal market. These results highlight how the composition of the local population can have a significant impact on the entrepreneurial responsiveness of the economy.
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