DP864 New-Firm Start-ups in Italy

Author(s): David B Audretsch, Marco Vivarelli
Publication Date: November 1993
Keyword(s): Entry, Income Choice, New Firms, Regional Development, Self-Employment
JEL(s): L10
Programme Areas: Applied Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=864

This paper applies a modified version of the `income choice' model to explain variations in new-firm formation across Italian provinces over the period 1985-8. Based on a panel data of start-up activity in 78 Italian provinces and using two different databases, we find support for the overall theory of income choice where individuals choose between earning wages from an incumbent enterprise or else profits from starting a new firm. In particular, the evidence suggests that labour market conditions such as wages and the relative impact of labour dislocation, profits and environmental factors such as the degree to which entrepreneurial networks already exist, shape the degree to which new firms are started.