Why so Many Local Entrepreneurs?

Michelacci, Claudio; Silva, Olmo

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Why so Many Local Entrepreneurs?

CEPR Discussion Paper No. 5828

54 Pages Posted: 10 Nov 2006

See all articles by Claudio Michelacci

Claudio Michelacci

Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR)

London School of Economics (LSE) - Centre for Economic Performance; London School of Economics & Political Science (LSE) - Department of Geography and Environment; Institute for the Study of Labor (IZA)

Date Written: September 2006

Abstract

We document that the fraction of entrepreneurs who work in the region where they were born is significantly higher than the corresponding fraction for dependent workers. This difference is more pronounced in more developed regions and positively related to the degree of local financial development. Firms created by locals are more valuable and bigger (in terms of capital and employment), operate with more capital intensive technologies, and are able to obtain greater financing per unit of capital invested, than firms created by non-locals. This evidence suggests that there are so many local entrepreneurs because locals can better exploit the financial opportunities available in the region where they were born. This can help in explaining how local financial development causes persistent disparities in entrepreneurial activity, technology, and income.

Keywords: Entrepreneurship, economic and financial development, social capital

JEL Classification: J23, O12, O16, Z13

Suggested Citation: Suggested Citation

Michelacci, Claudio and Silva, Olmo and Silva, Olmo, Why so Many Local Entrepreneurs? (September 2006). CEPR Discussion Paper No. 5828, Available at SSRN: https://ssrn.com/abstract=944046