Market size and entrepreneurship

In order to examine the impacts of market size on entrepreneurship, we estimate a monopolistic competition model that involves the workers’ decisions to pursue entrepreneurship by using data on Japanese prefectures. Our results show that a larger market size in terms of population density leads to a...

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Bibliographic Details
Published in:Journal of economic geography 2012-11, Vol.12 (6), p.1139-1166
Main Authors: Sato, Yasuhiro, Tabuchi, Takatoshi, Yamamoto, Kazuhiro
Format: Article
Language:English
Subjects:
Applied economics
Competition
Demographic economics
Economic models
Economies of agglomeration
Entrepreneurs
Entrepreneurship
Impact analysis
Market size
Monopolies
Monopolistic competition
Population density
Positive economics
Self employment
Studies
Urban economics
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Summary:In order to examine the impacts of market size on entrepreneurship, we estimate a monopolistic competition model that involves the workers’ decisions to pursue entrepreneurship by using data on Japanese prefectures. Our results show that a larger market size in terms of population density leads to a higher incentive for individuals to become entrepreneurs. A 10% increase in the population density increases the share of people who wish to become entrepreneurs by ∼1%. In contrast, such a positive effect on the self-employment rate is observed only for prefectures with very high or very low density. The self-employment ratio is negatively associated with population density in prefectures with medium density. This suggests that the there are manyex anteentrepreneurs but fewex postentrepreneurs.
ISSN:1468-2702
1468-2710
DOI:10.1093/jeg/lbr035