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

54 Pages Posted: 20 Dec 2018 Last revised: 19 Sep 2022

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: September 16, 2022

Abstract

We show that regional cash windfalls have long-lasting effects on the real economy by spurring entrepreneurship. We identify the effects using the Spanish Christmas Lottery, which provides a unique setting as prizes are large, geographically concentrated, and distributed among thousands of households. We find that lottery prizes lead to higher firm creation, startup job creation, and self-employment. Firms created in winning provinces are larger, more profitable, and more likely to survive longer. We also find evidence of general equilibrium effects operating thorough labor markets underscoring the need for studying large regional shocks to measure the overall impact of cash windfalls.

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, Do Cash Windfalls Affect Entrepreneurship? Evidence from the Spanish Christmas Lottery (September 16, 2022). 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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