Clustering Fosters Investment: Local Agglomeration and Household Portfolio Choice
48 Pages Posted: 6 Nov 2019 Last revised: 8 Mar 2021
Date Written: March 8, 2021
We investigate the impact of local agglomeration economies on household portfolio choice. Using detailed location and employment data from two U.S. household surveys, we document that individuals who work in locally agglomerated industries are more likely to invest in risky assets. This pattern is best explained by industry clusters enhancing human capital among local industry workers and in turn, amplifying their effective risk tolerance. Our findings highlight the complex role of geography in shaping household financial decisions.
Keywords: local agglomeration, household portfolio choice, human capital
JEL Classification: G11, J24, R23
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