How Do Cash Windfalls Affect Entrepreneurship? Evidence from the Spanish Christmas Lottery

64 Pages Posted: 20 Dec 2018 Last revised: 23 May 2024

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 University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Rafael Zambrana

University of Notre Dame - Mendoza College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2024

Abstract

We show cash windfalls affect the real economy by spurring entrepreneurship. We identify these effects using the Spanish Christmas Lottery, which provides a unique setting as prizes are geographically concentrated and distributed among thousands of households. We find higher start-up entry, job creation, and self-employment in winning regions. Consistent with a financial constraints channel, results are strongest in sectors relying on external finance and regions with limited credit access. Newly created firms are larger, more profitable, and survive longer. For existing firms, however, growth and profitability do not respond to lottery awards, but wages increase due to tighter labor markets.

Keywords: Entrepreneurship, Firm Creation, Job Creation, Cash Windfall, Economic Conditions, Disposable Income, Aggregate Effects, Financial Constraints

JEL Classification: D14, G30, L26

Suggested Citation

Bermejo, Vicente J. and Ferreira, Miguel Almeida and Wolfenzon, Daniel and Zambrana, Rafael, How Do Cash Windfalls Affect Entrepreneurship? Evidence from the Spanish Christmas Lottery (May 1, 2024). 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 Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Daniel Wolfenzon

Columbia University - Columbia Business School, Finance ( 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

University of Notre Dame - Mendoza College of Business ( email )

Notre Dame, IN 46556-5646
United States

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