Applied Seminar

Vicente J. Bermejo



Seminar 3 – 14:30


We study the effect of regional disposable income on entrepreneurial activity using the randomized assignment of monetary prizes provided by the Spanish Christmas Lottery. The lottery has a large economic impact on a local community because winning tickets are typically sold by one lottery outlet. We find higher firm creation and self-employment in winning provinces. Our estimates imply that 46 new firms are created for every 1,000 euros increase in disposable income per capita, and a cost per firm of 22 euros. The effect is present in both the non-tradable and tradable industries. In addition, the effect is more pronounced in regions with lower economic, financial, and social development. Conditional on entry, firms created in winning provinces are larger, create more value-added, rely more on equity, and are more likely to survive in the long run. Our results suggest that aggregate demand, financial constraints, and regional development are important drivers of entrepreneurial activity.

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