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Market size and entrepreneurship

  • Yasuhiro Sato
  • Takatoshi Tabuchi
  • Kazuhiro Yamamoto

In order to examine the impacts of market size on entrepreneurship, we estimate a monopolisticcompetition model that involves the workers' decisions to pursue entrepreneurship by using dataon Japanese prefectures. Our results show that a larger market size in terms of populationdensity leads to a higher incentive for individuals to become entrepreneurs. A 10% increase inthe population density increases the share of people who wish to become entrepreneurs byapproximately 1%. In contrast, such a positive effect on the self-employment rate is observedonly for prefectures with very high or very low densities. The self-employment ratio isnegatively associated with population density in prefectures with medium densities.

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Article provided by Oxford University Press in its journal Journal of Economic Geography.

Volume (Year): 12 (2012)
Issue (Month): 6 (November)
Pages: 1139-1166

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Handle: RePEc:oup:jecgeo:v:12:y:2012:i:6:p:1139-1166
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