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Windfall gains and entrepreneurial activity: Evidence from the Spanish Christmas lottery

Author

Listed:
  • Vicente J. Bermejo
  • Miguel A. Ferreira
  • Daniel Wolfenzon
  • Rafael Zambrana

Abstract

We estimate the effect of cash windfalls arising from the Spanish Christmas Lottery on entrepreneurship. This lottery provides a unique setting as prizes are geographically concentrated and distributed among thousands of households. We find that lottery prizes lead to higher firm creation, startup job creation, and self-employment. The entrepreneurial response is more pronounced in regions with poorer access to finance. Firms created in winning provinces are larger, more profitable, and more likely to survive longer. Incumbent firms in winning provinces do not benefit but increase wages, suggesting a local labor market tightening. Our results suggests that regional cash windfalls can have long-lasting effects on business activity.

Suggested Citation

  • Vicente J. Bermejo & Miguel A. Ferreira & Daniel Wolfenzon & Rafael Zambrana, 2022. "Windfall gains and entrepreneurial activity: Evidence from the Spanish Christmas lottery," Nova SBE Working Paper Series wp651, Universidade Nova de Lisboa, Nova School of Business and Economics.
    • Handle: RePEc:unl:unlfep:wp651
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    More about this item

    Keywords

    Entrepreneurship; Firm creation; Job creation; Cash windfall; Economic conditions; Disposable income; Aggregate effects; Financial constraints;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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