The Effects of High-skilled Firm Entry on Incumbent Residents

Abstract

Using 391 high-skilled firm entries in the U.S. from 1990–2010, we estimate the effects of the firm
entry on incumbent residents’ consumption, finances, and mobility. We compare outcomes for
residents living close to the entry location with those living far away while controlling for their
proximity to potential high-skilled firm entry sites. We find high-skilled incumbents, especially
homeowners, benefit. Low-skilled incumbents on average benefit less. For a representative firm
entry with 1000 new employees entering a metropolitan area with a population of 1.1 million,
the aggregate welfare benefit across all incumbents is an annual equivalent of $25 million. Low-skilled renters living within 10 minutes from the entry bear the largest costs.

Keywords: high-skilled firm entry; gentrification; real estate; agglomeration spillover; firm location; spatial treatment effects; household finance

JEL Classification: R30; G51; J01