DP14638 Entrepreneurship and Regional Windfall Gains: Evidence from the Spanish Christmas Lottery

Author(s): Vicente Bermejo, Miguel Ferreira, Daniel Wolfenzon, Rafael Zambrana
Publication Date: April 2020
Keyword(s): Aggregate income, entrepreneurship, Financial Development, firm creation, Local demand, public policy, Self-employment
JEL(s): D14, L26
Programme Areas: Labour Economics, Public Economics, Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14638

The Spanish Christmas Lottery is the largest lottery worldwide. We exploit local windfall gains arising from lottery prizes to estimate the effect of income on entrepreneurship. We find higher firm creation and greater self-employment in winning provinces. Our estimates imply that 46 firms are created for every â?¬1,000 increase in disposable income per capita. The effect occurs in both non-tradable and tradable industries, and is more pronounced in regions with poorer access to finance. Firms created in winning provinces are larger, create more value-added, and are more likely to survive. These results suggest that local income and financial development are important drivers of entrepreneurship.