IDEAS home Printed from https://ideas.repec.org/p/cns/cnscwp/200616.html
   My bibliography  Save this paper

What determines entrepreneurial clusters?

Author

Listed:
  • L. Guiso
  • F. Schivardi

    ()

Abstract

We contrast two potential explanations of the substantial differences in entrepreneurial activity observed across geographical areas - entry costs and external effects. We extend the Lucas model of entrepreneurship to allow for heterogeneous entry costs and for externalities that shift the distribution of entrepreneurial talents. We show that these assumptions have opposite predictions on the relation between entrepreneurial activity and firm level TFP - with different entry costs, in areas with more entrepreneurs firms' average productivity should be lower and vice versa. We test these implications on a sample of Italian firms and unambiguously reject the entry costs explanation in favor of the externalities one. We also investigate the sources of external effects, finding robust evidence that learning externalities are an important determinant of cross-sectional differences in entrepreneurial activity

Suggested Citation

  • L. Guiso & F. Schivardi, 2006. "What determines entrepreneurial clusters?," Working Paper CRENoS 200616, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  • Handle: RePEc:cns:cnscwp:200616
    as

    Download full text from publisher

    File URL: http://crenos.unica.it/crenos/node/248
    Download Restriction: no

    File URL: http://crenos.unica.it/crenos/sites/default/files/wp/06-16.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
    2. Edward P. Lazear, 2005. "Entrepreneurship," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 649-680, October.
    3. 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.
    4. Pakes, Ariel & Olley, Steven, 1995. "A limit theorem for a smooth class of semiparametric estimators," Journal of Econometrics, Elsevier, vol. 65(1), pages 295-332, January.
    5. Ricardo Lagos, 2006. "A Model of TFP," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 983-1007.
    6. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    7. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
    8. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
    9. 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.
    10. McKenzie, David J & Woodruff, Christopher, 2006. "Do Entry Costs Provide an Empirical Basis for Poverty Traps? Evidence from Mexican Microenterprises," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 3-42, October.
    11. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    12. Boyan Jovanovic & Rafael Rob, 1989. "The Growth and Diffusion of Knowledge," Review of Economic Studies, Oxford University Press, vol. 56(4), pages 569-582.
    13. Luigi Guiso & Fabiano Schivardi, 2007. "Spillovers in Industrial Districts," Economic Journal, Royal Economic Society, vol. 117(516), pages 68-93, January.
    14. Marianne Bertrand & Francis Kramarz, 2002. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1369-1413.
    15. Henderson, J. Vernon, 2003. "Marshall's scale economies," Journal of Urban Economics, Elsevier, vol. 53(1), pages 1-28, January.
    16. Banerjee, Abhijit V & Newman, Andrew F, 1994. "Poverty, Incentives, and Development," American Economic Review, American Economic Association, vol. 84(2), pages 211-215, May.
    17. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-342, April.
    18. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "Does Local Financial Development Matter?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 929-969.
    19. Thomas J. Holmes, 1999. "Localization Of Industry And Vertical Disintegration," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 314-325, May.
    20. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-748, August.
    21. Federico Cingano & Fabiano Schivardi, 2004. "Identifying the Sources of Local Productivity Growth," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 720-742, June.
    22. Moretti, Enrico, 2004. "Human capital externalities in cities," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 51, pages 2243-2291 Elsevier.
    23. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    24. Fonseca, Raquel & Lopez-Garcia, Paloma & Pissarides, Christopher A., 2001. "Entrepreneurship, start-up costs and employment," European Economic Review, Elsevier, vol. 45(4-6), pages 692-705, May.
    25. Guiso, Luigi & Schivardi, Fabiano, 2005. "Learning to be an Entrepreneur," CEPR Discussion Papers 5290, C.E.P.R. Discussion Papers.
    26. Jan Eeckhout & Boyan Jovanovic, 2002. "Knowledge Spillovers and Inequality," American Economic Review, American Economic Association, vol. 92(5), pages 1290-1307, December.
    27. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
    28. Alan Harrison, 1981. "Earnings by Size: A Tale of Two Distributions," Review of Economic Studies, Oxford University Press, vol. 48(4), pages 621-631.
    29. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
    30. J. V. Henderson & J. F. Thisse (ed.), 2004. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 4, number 4.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jacques Pelkmans & Andrea Renda, "undated". "Does EU Regulation Hinder or Stimulate Innovation?," IRMO Occasional Papers 5, Institute for Development and International Relations, Zagreb.
    2. Ehrl, Philipp, 2013. "Agglomeration economies with consistent productivity estimates," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 751-763.
    3. Di Addario, Sabrina & Vuri, Daniela, 2010. "Entrepreneurship and market size. The case of young college graduates in Italy," Labour Economics, Elsevier, vol. 17(5), pages 848-858, October.
    4. M. Pitzalis & I. Sulis & M. Porcu, 2008. "Differences of Cultural Capital among Students in Transition to University. Some First Survey Evidences," Working Paper CRENoS 200805, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    5. Emil PAPAZOV, 2011. "The Role of Entrepreneurship for Cluster Formation in the Economy," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 12(4), pages 839-846, October.
    6. Ferrante, Francesco & Ruiu, Gabiele, 2014. "Entrepreneurship. How important are institutions and culturally-based prior beliefs?," MPRA Paper 41915, University Library of Munich, Germany.
    7. Fernanda Llussa, 2011. "Determinants of Entrepreneurship: Are Women Different?," FEUNL Working Paper Series wp555, Universidade Nova de Lisboa, Faculdade de Economia.
    8. Silvia Ardagna & Annamaria Lusardi, 2009. "Where does regulation hurt? Evidence from new businesses across countries," NBER Working Papers 14747, National Bureau of Economic Research, Inc.
    9. Giuseppe Croce & Edoardo Di Porto & Emanuela Ghignoni & Andrea Ricci, 2013. "Employer education, agglomeration and workplace training: poaching vs knowledge spillovers," Working Papers 162, University of Rome La Sapienza, Department of Public Economics.
    10. Luigi Guiso & Aldo Rustichini, 2011. "What drives women out of entrepreneurship? The joint role of testosterone and culture," EIEF Working Papers Series 1102, Einaudi Institute for Economics and Finance (EIEF), revised Jan 2011.
    11. Guiso, Luigi & Pistaferri, Luigi & Schivardi, Fabiano, 2015. "Learning Entrepreneurship From Other Entrepreneurs?," CEPR Discussion Papers 10997, C.E.P.R. Discussion Papers.
    12. I. Sulis & M. Porcu, 2008. "Assessing the Effectiveness of a Stochastic Regression Imputation Method for Ordered Categorical Data," Working Paper CRENoS 200804, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    13. Baliamoune-Lutz, Mina, 2009. "Entrepreneurship and Reforms in Developing Countries," WIDER Working Paper Series 004, World Institute for Development Economic Research (UNU-WIDER).
    14. Silvia Ardagna & Annamaria Lusardi, 2010. "Explaining International Differences in Entrepreneurship: The Role of Individual Characteristics and Regulatory Constraints," NBER Chapters,in: International Differences in Entrepreneurship, pages 17-62 National Bureau of Economic Research, Inc.
    15. Angela Cipollone & Paolo E. Giordani, 2015. "Market Frictions in Entrepreneurial Innovation: Theory and Evidence," Working Papers CELEG 1505, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    16. Di Addario, Sabrina, 2011. "Job search in thick markets," Journal of Urban Economics, Elsevier, vol. 69(3), pages 303-318, May.
    17. Brunello, Giorgio & Langella, Monica, 2014. "Local Agglomeration, Entrepreneurship and the Great Recession: Evidence from Italian Industrial Districts," IZA Discussion Papers 8331, Institute for the Study of Labor (IZA).
    18. Tavassoli, Sam & Trippl, Michaela, 2017. "The Impact of Ethnic Communities on Immigrant Entrepreneurship: Evidence from Sweden," Papers in Innovation Studies 2017/17, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    19. G. Marletto, 2007. "Crossing The Alps: Three Transport Policy Options," Working Paper CRENoS 200712, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    20. Pelkmans, Jacques & Renda, Andrea, 2014. "Does EU regulation hinder or stimulate innovation?," CEPS Papers 9822, Centre for European Policy Studies.
    21. Mina Baliamoune-Lutz, 2008. "On Growth and Development," ICER Working Papers 13-2008, ICER - International Centre for Economic Research.
    22. OA Carboni & G. Medda, 2007. "Government Size and the Composition of Public Spending in a Neoclassical Growth Model," Working Paper CRENoS 200701, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

    More about this item

    Keywords

    entrepreneurship; clustering; agglomeration economies;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cns:cnscwp:200616. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antonello Pau). General contact details of provider: http://edirc.repec.org/data/crenoit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.