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  5. Entrepreneurship, Job Creation and Gender
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Entrepreneurship, Job Creation and Gender

Paper Session

Tuesday, Jan. 5, 2021 12:15 PM - 2:15 PM (EST)

Hosted By: American Economic Association
  • Chair: John Van Reenen, Massachusetts Institute of Technology

Who are America’s Job Creators? New Evidence from Longitudinal Tax Data

Raj Chetty
,
Harvard University
John Van Reenen
,
Massachusetts Institute of Technology
Owen Zidar
,
Princeton University
Eric Zwick
,
University of Chicago

Abstract

We use de-identified tax returns to characterize entrepreneurship across the American population since the late 1990s. Our longitudinal data permit an analysis of which new firms end up being highly successful, allowing us to distinguish startups that are destined to remain as small businesses from “job creators.” We document new facts on lifecycle of “job creating” entrepreneurs - from their family backgrounds, to the areas they grew up in, to their labor market trajectories. Entrepreneurs tend to be white, male and drawn from high-income families. Part of the relationship between parental income and entrepreneurship appears to be due to the causal effect of liquidity, based on an analysis of liquidity shocks around IPOs. Another part appears to be due to exposure: children exposed to more entrepreneurs while they are growing up are more likely to start businesses themselves. Entrepreneurs are often seen as vital to economic dynamism, so we contrast them with another engine of growth – inventors. We find that the geographic origins of entrepreneurs are more dispersed than those of inventors, although the origins of “star” (high job creators) and high tech entrepreneurs is more similar and concentrated in a few hubs. Children exposed to more entrepreneurship growing up tend to be more likely to become entrepreneurs themselves. Using a matched event study design, we find that (consistent with existing evidence), the variance of expected income increases after starting a business. However, contrary to received wisdom, becoming an entrepreneur has a positive effect on individual income even at the median. We conclude that increasing the number of “star” entrepreneurs may call for efforts to expand the supply of entrepreneurs, potentially through the provision of liquidity and exposure to entrepreneurship at early stages.

Rule of Law and Female Entrepreneurship

Nava Ashraf
,
London School of Economics
Alexia Delfino
,
Bocconi University
Edward Glaeser
,
Harvard University

Abstract

Commerce requires trust, but trust is difficult when one group consistently fears expropriation by another. If men have a comparative advantage at violence and there is little rule-of-law, then unequal bargaining power can lead women to segregate into low-return industries and avoid entrepreneurship altogether. In this paper, we present a model of female entrepreneurship and rule of law that predicts that women will only start businesses when they have both formal legal protection and informal bargaining power. The model's predictions are supported both in cross-national data and with a new census of Zambian manufacturers. In Zambia, female entrepreneurs collaborate less, learn less from fellow entrepreneurs, earn less and segregate into industries with more women, but gender differences are ameliorated when women have access to adjudicating institutions, such as Lusaka's “Market Chiefs” who are empowered to adjudicate small commercial disputes. We experimentally induce variation in local institutional quality in an adapted trust game, and find that this also reduces the gender gap in trust and economic activity.

More than an Ivory Tower: The Impact of Research Institutions on the Quantity and Quality of Entrepreneurship

Scott Stern
,
Massachusetts Institute of Technology
Valentina Tartari
,
Copenhagen Business School

Abstract

While universities are often associated with strong entrepreneurial ecosystems, the underlying drivers of this relationship have proved more elusive. Universities are often located in economic and innovation environments conducive to growth-oriented entrepreneurial activity, are themselves a source of (potentially skill-biased) local demand, and produce knowledge, which might serve as the foundation for new ventures. The principal contribution of this paper is to provide systematic empirical evidence for the unique role that universities play in shaping local entrepreneurial ecosystems, and in so doing allow for a reconceptualization of the underlying theoretical and policy drivers of the impact of universities on entrepreneurship. Our analysis includes three key interrelated steps. First, we combine comprehensive business registration records with a predictive analytics approach to estimate both the quantity and (growth-oriented) quality of entrepreneurship at the level of individual zip codes over time. Second, we link these locations to the presence or absence of research-oriented universities or national laboratories, and we construct comparison groups based on ex ante similarities in terms of demographics and the local economic environment. Finally, we take advantage of significant changes over time in Federal commitments to both universities and national laboratories, and in particular of the distinction between research-oriented versus more general financial support for university activities. Together, these building blocks allow us to highlight three core findings related to the role of universities on local entrepreneurial ecosystems. First, universities are associated with not only a higher level of entrepreneurship but in particular a higher level of quality-adjusted entrepreneurship (i.e., startups with a higher potential for growth at founding), and this relationship has strengthened over time. Second, demographic and economic factors associated with the presence of a university are even even more strongly associated with entrepreneurship

Immigration and Entrepreneurship in the United States

Pierre Azoulay
,
Massachusetts Institute of Technology
Benjamin Jones
,
Northwestern University
Daniel Kim
,
University of Pennsylvania
Javier Miranda
,
U.S. Census Bureau

Abstract

Immigration is often viewed as expanding the labor supply and creating greater competition for domestic workers. But immigrants may also play important roles in innovation, including starting new firms, that may both drive productivity growth and expand labor demand. This paper uses newly available U.S. administrative data to study the role of immigrants in entrepreneurship. We ask how often immigrants start companies, how many jobs these firms create, and how often these firms appear in high-tech sectors and achieve explosive growth. The findings suggest that immigrants are as much “job creators” as “job takers” and that non-U.S. born founders play outsized roles in U.S. high-growth entrepreneurship.
JEL Classifications
  • L2 - Firm Objectives, Organization, and Behavior
  • M1 - Business Administration