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Why So Many Local Entrepreneurs?

Author

Listed:
  • Claudio Michelacci

    (CEMFI)

  • Olmo Silva

    (CEP and EUI)

Abstract

We document that the fraction of entrepreneurs working in the region where they were born is significantly higher than the corresponding fraction for dependent workers. This is more pronounced in more developed regions and positively related to the degree of local financial development. Firms created by locals are bigger, operate with more capital-intensive technologies, and obtain greater financing per unit of capital invested, than firms created by nonlocals. This 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 helps to explain how local financial development causes persistent disparities in entrepreneurial activity, technology, and income. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Claudio Michelacci & Olmo Silva, 2007. "Why So Many Local Entrepreneurs?," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 615-633, November.
    • Handle: RePEc:tpr:restat:v:89:y:2007:i:4:p:615-633
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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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