Entrepreneurship and Regional Windfall Gains: Evidence from the Spanish Christmas Lottery
54 Pages Posted: 20 Dec 2018
Date Written: December 6, 2018
We study the effect of disposable income on entrepreneurial activity. We identify the effect using the randomized assignment of monetary prizes provided by the Spanish Christmas Lottery. The lottery has a large economic impact on a local community and winners tend to be geographically concentrated as tickets are typically sold by one outlet. We find higher firm creation and self-employment in winning provinces. This increase is also present in firms that are less dependent on local demand, and it is more pronounced in regions with lower access to finance. Conditional on entry, firms created in winning provinces are larger, create more value-added, rely more on equity, and are more likely to survive. Our results suggest that economic conditions and financial constraints are important drivers of entrepreneurial activity.
Keywords: Entrepreneurship, Disposable Income, Lottery, Financial Constraints
JEL Classification: G31, G38, J24
Suggested Citation: Suggested Citation