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Fiscal windfalls and entrepreneurship: fostering entry or promoting incumbents?

Author

Listed:
  • Mark J. Garmaise

    (UCLA Anderson)

  • Gabriel Natividad

    (Universidad de Piura)

Abstract

We study the impact of government fiscal windfalls on entrepreneurship through an analysis of shocks to transfer payments in Peru. These pure transfers generate higher government spending, and we contrast the impacts on incumbent firms and entrants. Incumbent exits from the financial system are reduced, but previously troubled firms experience deteriorating performance. Increased transfers result in higher rates of firm entry into formal borrowing and superior entrant outcomes. Overall, startups outperform non-startups after heightened transfers.

Suggested Citation

  • Mark J. Garmaise & Gabriel Natividad, 2024. "Fiscal windfalls and entrepreneurship: fostering entry or promoting incumbents?," Small Business Economics, Springer, vol. 62(1), pages 133-158, January.
    • Handle: RePEc:kap:sbusec:v:62:y:2024:i:1:d:10.1007_s11187-023-00757-3
    DOI: 10.1007/s11187-023-00757-3
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    More about this item

    Keywords

    Fiscal windfalls; Entry; Startups;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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