The Role of Startups for Local Labor Markets

72 Pages Posted: 29 Sep 2017

See all articles by Gerald A. Carlino

Gerald A. Carlino

Federal Reserve Bank of Philadelphia

Thorsten Drautzburg

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: 2017-09-27

Abstract

We investigate the dynamic response of local U.S. labor markets to increased job creation by new firms and compare the effects to overall labor demand shocks. To account for both dynamic and spatial dependence we develop a spatial panel VAR that builds on recent advances in the VAR literature to identify structural shocks using external instruments. We find that startup shocks have a small but persistent effect on local employment through population growth. Population growth, in turn, is largely driven by immigration. We also investigate how the responses differ by local characteristics such as population density. Finally, we show that startups are not closely linked to innovation.

Keywords: Startups, entrepreneurship, local labor markets, proxy VAR, spatial panel VAR

Suggested Citation

Carlino, Gerald A. and Drautzburg, Thorsten, The Role of Startups for Local Labor Markets (2017-09-27). FRB of Philadelphia Working Paper No. 17-31. Available at SSRN: https://ssrn.com/abstract=3045133

Gerald A. Carlino (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
215-574-6434 (Phone)
215-574-4364 (Fax)

Thorsten Drautzburg

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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