Shai Bernstein, Emanuele Colonnelli, Mr. Davide Malacrino, and Tim McQuade
New firm formation is a critical driver of job creation, and an important contributor to the responsiveness
of the economy to aggregate shocks. In this paper we examine the characteristics of the individuals who
become entrepreneurs when local opportunities arise due to an increase in local demand. We identify
local demand shocks by linking fluctuations in global commodity prices to municipality level agricultural
endowments in Brazil. We find that the firm creation response is almost entirely driven by young and
skilled individuals, as measured by their level of experience, education, and past occupations involving
creativity, problem-solving and managerial roles. In contrast, we find no such response within the same
municipalities among skilled, yet older individuals, highlighting the importance of lifecycle
considerations. These responsive individuals are younger and more skilled than the average entrepreneur
in the population. The entrepreneurial response of young individuals is larger in municipalities with better
access to finance, and in municipalities with more skilled human capital. These results highlight how the
characteristics of the local population can have a significant impact on the entrepreneurial responsiveness
of the economy.
International Monetary Fund. Asia and Pacific Dept
Australia has enjoyed a robust economic performance despite the commodity price and mining investment bust. The moderate impact of the large shocks since 2011 reflects prompt monetary easing, a flexible exchange rate acting as a shock absorber, export orientation to the dynamic Asia region, flexible labor markets, relatively high population growth, and strong institutions. Nevertheless, Australia has also been confronted with symptoms of the 'new mediocre' since the Global Financial Crisis, including a downshift in average GDP growth. And with declining interest rates, already high house prices and household debt ratios have started to rise again.