Essays on Macroeconomics, Self-Employment and Small Business in Cities

The first essay studies the effects of exogenous and endogenous shocks on output sustainability in Central Eastern Europe and Russia during the 2000s. It expands traditional vector autoregressive model to a multi-country model that relates bank real lending, the cyclical component of output and spreads and accounts for cross-sectional dependence across the countries. Impulse response functions show that exogenous positive shock lead to a drop in output sustainability for nine over twelve Central Eastern European countries, when the endogenous shock is mild and ambiguous. Moreover the effect of the exogenous shock is more significant in the aftermath the crises. The second essay investigates variation in entrepreneurial activity, as proxied by the rate of self-employment, across 374 European cities during the period of 1989-2010. While controlling for various spillover effects across cities we find that the rate of self-employment is largely explained by the level of education, urbanisation economies, institutional environment and industrial structure of a city. Self-employment rates are higher in agriculture and fishing industry; trade, hotels and restaurants industry; meanwhile mining, manufacturing and energy sector with higher positive effect of scale abandon self-employment. At the same time a U-shaped relationship per resident income determines existence of both necessity driven and genuine self-employment. The third essay explains variation in entrepreneurship across cities of Commonwealth of Independent States during 1995-2008, utilizing a unique database and employing dynamic panel data analysis. The findings suggest that banking reform facilitates entrepreneurship, whereas the size of the state discourages it. A U-shaped relationship between per capita income and entrepreneurship is confirmed. It‘s established that a city with a higher concentration of universities is likely to have higher entrepreneurial entry that provides some evidence for the importance of agglomeration economies in terms of knowledge concentration which leads to intensified exchange of ideas and drive knowledge-based entrepreneurship.