Essays on Entrepreneurship and Local Labor Markets

Abstract

This dissertation explores the relationship between external shocks local labor markets and entrepreneurship. The first and main essay investigates the effects of a large firm's geographical expansion (anchor firm) on local worker transitions into startup employment through wage effects in industries economically proximate to the anchor firm. Using hand collected data on large firms' site searches matched to administrative Census microdata, I exploit lists of anchor firms' site selection process to employ a difference-in-differences approach to compare workers and employers in winning counties to those in counterfactual counties. Counties are balanced along a number of socio-economic characteristics as well as ex ante industry distribution, firm size distribution, and firm age distribution. The arrival of an anchor firm induces entrepreneurship in industries linked through input-output channels by a magnitude of 120 new establishments that account for over 2,300 jobs. Relative to young firms in counterfactual counties, these new firms grow 12% faster in five-year employment growth and have a 7% lower failure probability. These effects are strongest in the most specialized and knowledge-intensive industries. Attracting an anchor firm to account appears to have limited spillover effects in employment that are mainly driven by reorganization of incumbent firms in input-output industries with occupational similarity of the anchor firm that face rising labor costs. The second essay provides a blueprint for understanding the dynamics surrounding mass layoffs and business closures. This essay creates a novel data set linking geocoded Business Registration data to public layoff notifications data. This data can be used to understand how local entrepreneurship can reduce unemployment spells and earnings penalties for low wage displaced workers. Workers eventually employed by startups experience faster post-displacement wage growth than those eventually employed by mature firms. In final essay, I provide motivation for research investigating the spatially heterogeneous effects the advancement of certain industries inhibit entrepreneurship in others. I decompose a Bartik employment measure of demand for a region's labor. The decomposition shows that the recovery from the Great Recession was led by capital-intensive industries (e.g., transportation manufacturing and machinery manufacturing) that are typically inversely associated with local entrepreneurship. Interestingly, the inverse association of these industries and entrepreneurship appears to spillover into other industries. These industries include transportation equipment manufacturing and machinery manufacturing. This set of observations motivates this dissertation's research agenda to understand the cross-industry relationships that drive an area's level of entrepreneurship and labor market dynamism.