LOCATION AND ENTREPRENEURSHIP: INSIGHTS FROM A SPATIALLY-EXPLICIT OCCUPATIONAL CHOICE MODEL WITH AN APPLICATION TO CHILE

Felix Modrego*, Philip McCann, William E. Foster, M. Rose Olfert

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

5 Citations (Scopus)
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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 languageEnglish
Pages (from-to)669-697
Number of pages29
JournalJournal of Regional Science
Volume57
Issue number4
DOIs
Publication statusPublished - Sept-2017

Keywords

  • REGIONAL-VARIATIONS
  • INCREASING RETURNS
  • WAGE DISPARITIES
  • SELF-EMPLOYMENT
  • MARKET
  • GROWTH
  • SIZE
  • DETERMINANTS
  • PERSISTENCE
  • INNOVATION

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