Globalization, Competition and Entrepreneurial Activity: Theory and Evidence from U.S. Households

WFA 2018 Meeting Paper

AEA 2019 Meeting Paper

EFA 2019 Meeting Paper

Journal of Monetary Economics, Forthcoming

57 Pages Posted: 23 Oct 2017 Last revised: 22 Apr 2021

See all articles by Hadiye Aslan

Hadiye Aslan

Georgia State University - Department of Finance

Praveen Kumar

University of Houston - Department of Finance

Date Written: July 24, 2019

Abstract

We theoretically and empirically analyze whether the rise in globalization and trade integration of product markets have contributed to the observed decline in US entrepreneurship. Using a unique panel dataset of US households and a difference-in-differences identification strategy, our study is unique in theoretically predicting and empirically documenting asymmetric inter-industry shifts in entrepreneurial activity across different sectors in response to increased competition from lower-cost imports. Greater import competition reduces entry in exposed industries by individuals with low occupational skills (those in routine task-intensive service occupations or exhibiting high occupational mobility), but it increases entry by highly educated individuals in high-skill non-exposed industries. The results are robust to secular trends, labor market specialization, local collateral and credit shocks, and long-run bank distress.

Keywords: Entrepreneurship, Product Market Competition, U.S. Census Data, Entry and Exit

JEL Classification: F14, F16, L26, G21

Suggested Citation

Aslan, Hadiye and Kumar, Praveen, Globalization, Competition and Entrepreneurial Activity: Theory and Evidence from U.S. Households (July 24, 2019). WFA 2018 Meeting Paper, AEA 2019 Meeting Paper, EFA 2019 Meeting Paper, Journal of Monetary Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3056827 or http://dx.doi.org/10.2139/ssrn.3056827

Hadiye Aslan (Contact Author)

Georgia State University - Department of Finance ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

Praveen Kumar

University of Houston - Department of Finance ( email )

Houston, TX 77204
United States
713-743-4770 (Phone)
713-743-4789 (Fax)

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