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LOCATION AND ENTREPRENEURSHIP: INSIGHTS FROM A SPATIALLY‐EXPLICIT OCCUPATIONAL CHOICE MODEL WITH AN APPLICATION TO CHILE
Author(s) -
Modrego Félix,
McCann Philip,
Foster William E.,
Olfert M. Rose
Publication year - 2017
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/jors.12323
Subject(s) - entrepreneurship , economics , general equilibrium theory , partial equilibrium , microeconomics , selection (genetic algorithm) , economic geography , labour economics , finance , artificial intelligence , computer science
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.