Entrepreneurship and Regional Windfall Gains: Evidence from the Spanish Christmas Lottery

54 Pages Posted: 20 Dec 2018 Last revised: 22 Mar 2019

See all articles by Vicente J. Bermejo

Vicente J. Bermejo

ESADE Business School

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Daniel Wolfenzon

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Rafael Zambrana

Nova School of Business and Economics

Date Written: March 15, 2019

Abstract

We study the effect of regional disposable income on entrepreneurial activity using the randomized assignment of monetary prizes provided by the Spanish Christmas Lottery. The lottery has a large economic impact on a local community because winning tickets are typically sold by one lottery outlet. We find higher firm creation and self-employment in winning provinces. Our estimates imply that 46 new firms are created for every 1,000 euros increase in disposable income per capita, and a cost per firm of 22 euros. The effect is present in both the non-tradable and tradable industries. In addition, the effect is more pronounced in regions with lower economic, financial, and social development. Conditional on entry, firms created in winning provinces are larger, create more value-added, rely more on equity, and are more likely to survive in the long run. Our results suggest that aggregate demand, financial constraints, and regional development are important drivers of entrepreneurial activity.

Keywords: Entrepreneurship, Firm creation, Regional income, Local demand, Financial constraints, Social-demographic, Economic activity, Self-employment

JEL Classification: D14, L26

Suggested Citation

Bermejo, Vicente J. and Ferreira, Miguel Almeida and Wolfenzon, Daniel and Zambrana, Rafael, Entrepreneurship and Regional Windfall Gains: Evidence from the Spanish Christmas Lottery (March 15, 2019). Available at SSRN: https://ssrn.com/abstract=3297158 or http://dx.doi.org/10.2139/ssrn.3297158

Vicente J. Bermejo

ESADE Business School ( email )

Av. de Pedralbes, 60-62
Barcelona, 08034
Spain

Miguel Almeida Ferreira (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Daniel Wolfenzon

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rafael Zambrana

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, Lisbon 1099-032
Portugal

Register to save articles to
your library

Register

Paper statistics

Downloads
75
Abstract Views
508
rank
315,195
PlumX Metrics