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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 monopolistic competition model that involves entrepreneurial decision by using data on Japanese prefectures. Our results show that a larger market size measured by the population density leads to higher incentive of people to become entrepreneurs. a 10 percent increase in the population density increases the share of people who wish to become entrepreneurs by 2 percent. In contrast, the self-employment ratio is lower in prefectures with higher population density, which suggests that the market size has different impacts on the entrepreneurship in different stages.

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File URL: http://hdl.handle.net/10.1093/jeg/lbr035
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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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