Industry Clusters and the Geography of Portfolio Choice
53 Pages Posted: 6 Nov 2019 Last revised: 10 Aug 2022
Date Written: August 9, 2022
Using detailed data on U.S. households' locations, employment, and financial portfolios, we document that individuals employed in locally clustered industries are more likely to invest in risky assets. This pattern is strongest among individuals with high labor income, employed in skilled occupations, and with strong cognitive skills. Our overall evidence suggests the relation between industry clusters and investment decisions is best explained by clusters enhancing human capital among local industry workers, in turn amplifying their effective risk tolerance. Our findings highlight the important role of local labor market composition in generating household portfolio patterns within and across geographies.
Keywords: local agglomeration, household portfolio choice, human capital
JEL Classification: G11, J24, R23
Suggested Citation: Suggested Citation