Abstract
Occupational choice and heterogeneous managerial ability enter a spatial Dixit-Stiglitz setting, linking location, wages and regional entrepreneurship rates. Market potential has a positive partial effect and wages a negative partial effect on the regional supply of entrepreneurs, both balancing in equilibrium with endogenous wages. Market potential increases profits, but also the opportunity cost of entrepreneurship. In the long-run equilibrium with perfect mobility, the cut-off level of ability determining selection into entrepreneurship will be the same across regions; moreover, regional differences in entrepreneurship rates depend only in differences in average fixed costs of firms. An empirical application is provided for Chile.
Original language | English |
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Pages (from-to) | 669-697 |
Number of pages | 29 |
Journal | Journal of Regional Science |
Volume | 57 |
Issue number | 4 |
DOIs | |
Publication status | Published - Sept-2017 |
Keywords
- REGIONAL-VARIATIONS
- INCREASING RETURNS
- WAGE DISPARITIES
- SELF-EMPLOYMENT
- MARKET
- GROWTH
- SIZE
- DETERMINANTS
- PERSISTENCE
- INNOVATION