Income inequality and entrepreneurship: Lessons from the 2020 COVID-19 recession

Christoph Albert, Andrea Caggese, Beatriz González and Victor Martin-Sanchez

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We study entry into entrepreneurship during the COVID-19 recession of 2020 using new data from an extensive survey of more than 24,000 Spanish households, conducted between June and November 2020. We find that while the overall decline in the startup rate in 2020 was large, and of a similar magnitude as that during the Great Recession, the differential impact depending on ex ante income was starkly different. During 2020, the drop in firm entry was entirely concentrated among low -and medium- income households. We show that the entrepreneurship gap between these households and their high-income counterparts is not directly explained by social distancing, since it is mostly driven by the sectors not directly affected by lockdown measures, and it is larger among households that did not suffer a negative income shock during the pandemic. We instead find evidence indicating that high-income households performed relatively better during the COVID-19 recession because they had the means to exploit new business opportunities, thanks to their larger wealth and better access to external finance.

Keywords: Recessions; financial crisis; entrepreneurship; firm dynamics; coronavirus; COVID-19 (search for similar items in EconPapers)
JEL-codes: D22 E20 E32 J23 M13 (search for similar items in EconPapers)
Date: 2022-10
New Economics Papers: this item is included in nep-ent, nep-eur and nep-sbm
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Related works:
Journal Article: Income inequality and entrepreneurship: Lessons from the 2020 COVID-19 recession (2023)
Working Paper: Income Inequality and Entrepreneurship: Lessons from the 2020 COVID-19 Recession (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1852

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