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The Cultural Roots of Firm Entry, Exit, and Growth

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  • Katharina Erhardt
  • Simon Haenni

Abstract

Can culture explain persistent differences in economic activity among individuals and across regions? A novel measure of cultural origin enables us to contrast the entrepreneurial activity of individuals located in the same municipality but whose ancestors lived just on opposite sides of the Swiss language border in the 18th century. Individuals with ancestry from the German-speaking side create 20% more firms than those with ancestry from the French-speaking side. These differences persist over generations and independent of the predominant culture at the current location. Yet, founders’ ancestry does not affect exit or growth of newly-founded firms. A model of entrepreneurial choice and complementary survey evidence suggest that the empirical patterns are mainly explained by differences in preferences, rather than skill. The results have sizable economic implications, accounting for 120,000 additional jobs over a period of 15 years.

Suggested Citation

  • Katharina Erhardt & Simon Haenni, 2021. "The Cultural Roots of Firm Entry, Exit, and Growth," CESifo Working Paper Series 9198, CESifo.
  • Handle: RePEc:ces:ceswps:_9198
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    References listed on IDEAS

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    1. Jose Asturias & Sewon Hur & Timothy J. Kehoe & Kim J. Ruhl, 2015. "Firm Entry and Exit and Aggregate Growth," Working Papers 15-07, New York University, Leonard N. Stern School of Business, Department of Economics.
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    More about this item

    Keywords

    culture; entrepreneurship; natural experiment; spatial RDD;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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