Refined by Fire: The Great Depression and Entrepreneurship

46 Pages Posted: 14 May 2019 Last revised: 3 Apr 2020

See all articles by Christos Makridis

Christos Makridis

Stanford University; Columbia University - Columbia Business School

Erin McGuire

Mondelez International

Date Written: July 24, 2019


Industrial production in the United States declined by 47 percent between 1929 and 1933. This paper quantifies how the severity of the Great Depression within a location may affect contemporaneous entrepreneurship rates. On one hand, a more severe decline in productivity could have persistent effects that adversely affect entrepreneurship today. On the other hand, a more severe decline could have prompted individuals growing up during the Great Depression to become more entrepreneurial and frugal, thereby influencing the values they emphasized to their children. Consistent with the latter hypothesis, we find that a one percentage point increase in retail sales growth is associated with a 0.04 percentage point decline in entrepreneurship two generations later. Using the Panel Study of Income Dynamics, we explore the role of personal experience and upbringing as a moderating factor, finding that individuals in areas more affected by the Depression are more financially sophisticated.

Keywords: Entrepreneurship; Growth; Great Depression; Behavioral Finance

JEL Classification: O4, E71, N12, E21

Suggested Citation

Makridis, Christos and McGuire, Erin, Refined by Fire: The Great Depression and Entrepreneurship (July 24, 2019). Available at SSRN: or

Christos Makridis (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Erin McGuire

Mondelez International ( email )

100 Deforest Ave
East Hanover, NJ 07936
United States

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