Entrepreneurship and Regional Windfall Gains : Evidence from the Spanish Christmas Lottery

We exploit regional windfall gains arising from the Spanish Christmas Lottery to estimate the effect of disposable income on entrepreneurial activity. We find higher firm creation in winning provinces. Our estimates imply that 46 firms are created for every €1,000 increase in disposable income per capita. We show that the effect is similar in non-tradable and tradable industries, and is more pronounced in regions with poorer access to finance. Firms created in winning provinces are larger, create more value-added, and are more likely to survive. Our results suggest that financial constraints restrict firm entry and post-entry growth