Clustering Fosters Investment: Local Agglomeration and Household Portfolio Choice
34 Pages Posted: 31 Jan 2017 Last revised: 14 Mar 2018
Date Written: March 11, 2018
We investigate the impact of local agglomeration economies on household portfolio choice. Using microdata from U.S. household surveys, we document that when the industry in which individuals work is locally agglomerated, they are more likely to invest in risky assets. This pattern is best explained by industry clusters enhancing human capital and in turn, raising workers' allocations to risky assets. Our analysis underscores the role of geography in shaping household financial decisions.
Keywords: local agglomeration, household portfolio choice, human capital
JEL Classification: G11, J24, R23
Suggested Citation: Suggested Citation