Discouraged Entrepreneurs and Persistence in Local Entrepreneurship. The Italian Case, 2001-2008

Italy is characterized by large territorial differences in entrepreneurial rates. The main aims of this paper are to provide a better understanding of the factors affecting these differences and explain the reason of their persistence over time. The persistence of territorial differences may depend on the differences in explanatory variables of entrepreneurial rates or on the presence of path-dependent effects. For the empirical analysis, we consider the creation of new firms in Italy from 2001 to 2008 at territorial level (103 provinces) and disaggregated by sector of activity. Using the adult population as normalizing variable, the entrepreneurial rate is defined as the total number of new firms in a year on the adult population at the beginning of the same year. We find a negative effect of unemployment on entrepreneurial rates that confirms the predominance of the discouraging effect of unemployment on the refugee effect. Moreover, local unemployment has a negative impact on persistence thus suggesting that the refugee effect hold only as a second order condition.