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Market size and entrepreneurship

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  • Yasuhiro Sato
  • Takatoshi Tabuchi
  • Kazuhiro Yamamoto

Abstract

In order to examine the impacts of market size on entrepreneurship, we estimate a monopolistic competition model that involves entrepreneurial decision by using data on Japanese prefectures. Our results show that a larger market size measured by the population density leads to higher incentive of people to become entrepreneurs. a 10 percent increase in the population density increases the share of people who wish to become entrepreneurs by 2 percent. In contrast, the self-employment ratio is lower in prefectures with higher population density, which suggests that the market size has different impacts on the entrepreneurship in different stages.
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Suggested Citation

  • Yasuhiro Sato & Takatoshi Tabuchi & Kazuhiro Yamamoto, 2012. "Market size and entrepreneurship," Journal of Economic Geography, Oxford University Press, vol. 12(6), pages 1139-1166, November.
    • Handle: RePEc:oup:jecgeo:v:12:y:2012:i:6:p:1139-1166
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    More about this item

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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