How Do Cash Windfalls Affect Entrepreneurship? Evidence from the Spanish Christmas Lottery

Vicente J. Bermejo, Miguel A. Ferreira, Daniel Wolfenzon and Rafael Zambrana

Journal of Financial and Quantitative Analysis, 2025, vol. 60, issue 5, 2229-2258

Abstract: We show cash windfalls affect the real economy by spurring entrepreneurship. We identify these effects using the Spanish Christmas Lottery, which provides a unique setting as prizes are geographically concentrated and distributed among thousands of households. We find higher start-up entry, job creation, and self-employment in winning regions. Consistent with a financial constraints channel, results are strongest in sectors relying on external finance and regions with limited credit access. Newly created firms are larger, more profitable, and survive longer. For existing firms, however, growth and profitability do not respond to lottery awards, but wages increase due to tighter labor markets.

Date: 2025
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