Does Local Business Ownership Insulate Cities from Economic Shocks?

44 Pages Posted: 15 Oct 2009  

Jed Kolko

Public Policy Institute of California

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Abstract

We assess a prominent argument for local economic policies that favor locally-owned businesses ヨ namely, that locally-owned firms are more likely to internalize the costs to the community of decisions to reduce employment and hence help to insulate cities from adverse economic shocks. We test this argument by examining how establishment-level employment responses to economic shocks are affected by establishment ownership. We find evidence hat some types of local ownership do insulate regions from economic shocks, although the clearest benefits do not come from small, independent businesses, but instead from corporate headquarters and, to a lesser extent, from small, locally-owned chains.

Keywords: employment stability, employment shocks, local ownership

JEL Classification: R11, R38, J23

Suggested Citation

Kolko, Jed and Neumark, David, Does Local Business Ownership Insulate Cities from Economic Shocks?. IZA Discussion Paper No. 4415. Available at SSRN: https://ssrn.com/abstract=1489238

Jed Kolko (Contact Author)

Public Policy Institute of California ( email )

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Suite 800
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David Neumark

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States
949-824-8496 (Phone)
949-824-2182 (Fax)

HOME PAGE: http://www.socsci.uci.edu/~dneumark/

National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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