Entrepreneurship and Poverty Reduction in Rural America. Nicholas Kacher and Stephan Weiler

Transcription

1 Entrepreneurship and Poverty Reduction in Rural America Nicholas Kacher and Stephan Weiler

2 Research Question, Broadly Does an entrepreneurial project have benefits aside from jobs it does (or doesn t) create? Economy-wide, small young firms drive jobcreation (e.g. Haltiwangeret al. 2017) Labor productivity growth falls to near zero in firms older than 5 years (Shambaugh 2018) 2

3 Research Question, Narrowly Do spillovers from dynamic turnover openings and closures of establishments - lead to: Economic growth? Poverty reduction? odo results vary across metro/micro/rural areas? odoes turnover in different sectors have different impacts? Changes in Inequality? 3

4 Conceptual Framework Entrepreneurship Schumpeter (1942) Aghion & Howitt (1990) Bunten et al. (2015)? Growth? Poverty Reduction Information Akerlof (1970) Hendricks and Kovenock (1989) Lang and Nakamura (1993) 4

5 Entrepreneurship Measured as the opening (or closure) of a business establishment A single physical location where business is conducted or industrial operations are performed with at least one employee Can be a new firm, or expansion of an existing firm ØNew combination of product/service, location, labor, capital 5

6 Establishment Turnover Establishment births and deaths closely correlated, but overall turnover varies widely across counties Effects of higher turnover? Negatives: Risk, uncertainty, frictional unemployment Positive: Information spillovers, long-term growth? Data: Survey of Business Owners Business Information Tracking Series 6

7 Declining Turnover Openings and closures have fallen in metro and nonmetro areas Greater decrease in metro counties 7

8 Information Spillovers Business productivity dependent on information Demand, availability of inputs, capital, etc. Hypothesis: Info from observing the successes and failures of other ventures Any venture, successful or not, informs followers Information is market-specific Only relevant to another potential project if it provides info about the conditions that establishment faces 8

9 Entrepreneurship and Growth Bunten et al. (2015) Turnover (establishment births*deaths, after controlling separately for births and deaths) contributes to stronger county employment growth in time period Strongest among Metro counties Endogeneity addressed by IVs Post-Recession Turnover contributes to growth only among metro counties, although births still drive growth generally results 9

10 Entrepreneurship and Poverty Reduction? Do these spillover effects reduce local poverty? Shambaugh et al Dynamism increases number of job openings, which improves workers options and bargaining power Ø Local dynamism may be especially important as interstate mobility declines (e.g. Frey 2009) Partridge & Rickman Increasing returns (e.g. Ades and Glaeser 1994, Krugman 2001) vs. Inter-regional equilibration (e.g. Blanchard and Katz 1992) 10

11 Poverty Summary Stats Poverty data from Census Small Area Income and Poverty Estimates (SAIPE), using Census poverty line definitions 17.5 Poverty by Year, All Counties (SAIPE data) Modal poverty rate ~12%, some counties much higher Poverty declined on average from 2010 to 2016, but not smoothly 11

12 Poverty Summary Stats Higher average poverty, and less poverty reduction, in rural counties Large variation in both initial poverty and poverty reduction No correlation between 2010 poverty and poverty reduction Overall turnover has declined in past decade, decreasing dynamism 12

13 Poverty Summary Stats 2016 Poverty Rate - Unweighted County Averages Poverty Reduction Unweighted County Averages All Metro Micro Rural 0 All Metro Micro Rural Median Mean Highest poverty rates in non-metro areas Mean poverty > median in non-metro Some counties with very high poverty rates Poverty reduction has been slowest in more rural areas Median Mean (back) 13

14 Empirical Model OLS first-difference approach:!"#$%&'($)*+&,"-., = :;<=>?=>;>@=ABC D=EF>G<H A,IJ9J KL&*%LM NO$-,&,$P. + 6 Q RLSS$)!"T*ML&,"- U%"V&h. +6 X R"S,-+"O$ T$% +LT,&L., Y ZhL%$ V,&h [N., \%$L&,#$ \MLPP ZhL%$., ] N%&P ZhL%$., ^_,P&L-+$ &" `ZN. + 6 a _$OL-) Zh"+b., c. Entrepreneurial Projects includes Establishment Births, Deaths and Births*Deaths 14

15 Entrepreneurship and Poverty Reduction All Counties Dependent Variable: Percent Reduction in County Poverty Rate Metro (n=825) Non-metro (n=2225) Establishment Births *** Establishment Deaths Establishment Births*Deaths Bartik Demand Shock *** *** Lagged Employment Growth, *** 0.058*** Log Employment *** Population Density *** Creative Class Employment Share ** *** Arts Employment Share ** Share with Bachelor's Degree or Higher, *** 0.478*** Lagged Population Growth, *** 3.834*** Median Age ** Amenity Score *** Distance to Nearest MSA *** *** Constant R-Squared 3.058*** *** Establishment Births reduce poverty overall, yet Interestingly, birth effects concentrated in non-core No clear effect of turnover on poverty reduction

16 Entrepreneurship and Poverty Reduction Dependent Variable: Percent Reduction in County Poverty Rate (obs = 3032) All Counties n=3032 Metro n=825 Micro n=637 Rural n=1610 Establishment Births *** * Establishment Deaths Establishment Births*Deaths Bartik Demand Shock *** *** *** Lagged Employment Growth, *** 0.076*** 0.143*** 0.031*** Log Employment *** Population Density *** *** Creative Class Employment Share *** ** *** ** Arts Employment Share ** Share with Bachelor's Degree or Higher, *** 0.695*** 0.646*** 0.451*** Lagged Population Growth, *** *** *** Median Age *** ** Amenity Score 0.506*** *** Distance to Nearest MSA *** *** ** Constant R-Squared 6.096* 3.058*** **

17 Sector-Specific Entrepreneurship and Poverty Reduction Does the effect vary by sector?!"#$%&'($)*+&,"-., = &%$9%$-$*%,:;!%"<$+&= >?, AB$-,&,$=. + 6 C D:EE$)!"9*;:&,"- F%"G&h. +6 I D"E,-+"B$ 9$% +:9,&:., J Kh:%$ G,&h LA., M%$:&,#$ M;:== Kh:%$., N A%&= Kh:%$., O P,=&:-+$ &" QKA. + 6 R P$B:-) Kh"+S., T. Same model as before, but run separately for each sector j, defined at the two-digit NAICS level 17

18 Sector-Specific Entrepreneurship and Poverty Reduction 1. Positive: Coefficient on Births*Deaths is positive at 5% level, or coefficient on Deaths is positive at 5% level 2. Negative: Coefficient on Births*Deaths is negative at 5% level; Deaths either negative or insignificant Ø Note: births have a positive impact on poverty reduction in almost all cases High/low wage sectors? Tradable/nontradable (Moretti 2010) QCEW average weekly pay (2013) reported in parentheses 18

19 Sector-Specific Entrepreneurship and Poverty Reduction All Counties Positive Mining, Quarrying, and Oil and Gas Extraction ($1,787) Negative Wholesale Trade ($1,257) Utilities ($1,716) Retail Trade ($532) Manufacturing ($1,129) Transportation and Warehousing ($532) Finance and Insurance ($1,530) Information ($1,257) Real Estate, Rental, and Leasing ($880) Administrative and Support and Waste Management and Remediation Services ($656) Management of Companies ($1,926) Health Care and Social Assistance ($841) Other Services (Except Public Administration) ($621) Arts, Entertainment, and Recreation ($576) Accommodation and Food Services ($345) Turnover in higher-paying sectors tends to correlate with subsequent poverty reduction 19

20 Sector-Specific Entrepreneurship and Poverty Reduction Non-Metro Counties (n=1610) Positive Negative Construction ($985) Information ($1,257) Wholesale Trade ($1,257) Finance and Insurance ($1,530) Professional, Scientific, and Technical Services ($1,526) Administrative and Support and Waste Management and Remediation Services ($656) Educational Services ($862) Health Care and Social Assistance ($841) Other Services (except Public Administration) ($621) Manufacturing ($1,129) Retail Sales ($532) Accommodations and Food Services ($345) 20

21 Extension Entrepreneurship and Inequality? Does dynamism effect overall inequality? Might depend on nature of jobs created, characteristics of in/out-migration, etc. Data issue Gini for all counties only available in 5-year ACS!"#" $,&'() = + ' + -. / :;3<1= 6,>?.? + + FGH#"B"HI $ + + J KALLHM NOPCEAB"O#!DOQBh $ ++ S KOL "#TOGH PHD TAP"BA $,&'(' + + U VhADH Q"Bh WF $,&'(' + + ) XDHAB"YH XEAII VhADH $,&'(' ++ Z FDBI VhADH $,&'(' + + [ \"IBA#TH BO ]VF $ + +^\HGA#M VhOT_ $,&'('`&'() + a $ 21

22 Entrepreneurship and Inequality Dependent Variable: Gini Coefficient, 2016 ACS 5-year estimate All Counties n=3032 Metro n=825 Micro n=637 Rural n=1610 Establishment Births Establishment Deaths ** * ** Establishment Births*Deaths *** ** Bartik Demand Shock * *** *** Lagged Employment Growth, *** *** *** *** Log Employment *** *** Log Income *** *** *** *** Population Density *** ** *** Creative Class Employment Share *** *** Arts Employment Share *** *** ** *** Share with Bachelor's Degree or Higher, *** Lagged Population Growth, *** *** *** *** Median Age *** *** Amenity Score ** *** *** Distance to Nearest MSA *** *** * Constant R-Squared *** *** ***

23 Implications and Next Steps Turnover predicts employment growth in metro counties Establishment births increase employment growth and reduce poverty in rural areas Some sectors dynamism and even deaths reduce poverty as well Little effect on inequality, although need better data Next steps Further analysis of tradable/nontradable Spatial robustness Does info spill over across counties? Possible endogeneity: Instrumental variable approaches? 23

24 Sector-Specific Entrepreneurship and Poverty Reduction Metro Counties (n=825) Positive Mining, Quarrying, and Oil and Gas Extraction ($1,787) Construction ($985) Wholesale Trade ($1,257) Information ($1,257) Negative Finance and Insurance ($1,530) Real Estate, Rental, and Leasing ($880) Administrative and Support and Waste Management and Remediation Services ($656) Educational Services ($862) Health Care and Social Assistance ($841) Arts, Entertainment, and Recreation ($576) Accommodation and Food Services ($345) Other Services (Except Public Administration) ($621) Manufacturing ($1,129) Retail Trade ($532) 24

25 Sector-Specific Entrepreneurship and Poverty Reduction Micropolitan Counties (n=637) Positive Negative Wholesale Trade ($1,257) Information ($1,257) Other Services (except Public Administration) ($621) 25

26 Sector-Specific Entrepreneurship and Poverty Reduction Rural Counties (n=1610) Positive Negative Construction ($985) Agriculture, Forestry, Fishing and Hunting ($545) Wholesale Trade ($1,257) Information ($1,257) Finance and Insurance ($1,530) Arts, Entertainment, and Recreation ($576) Real Estate, Rental, and Leasing ($880) Transportation and Warehousing ($532) Professional, Scientific, and Technical Services ($1,526) Administrative and Support and Waste Management and Remediation Services ($656) Educational Services ($862) Health Care and Social Assistance ($841) Other Services (Except Public Administration) ($621) Manufacturing ($1,129) Retail Trade ($532) 26

27 Entrepreneurship and Employment Growth Dependent Variable: Percent Employment Growth All Counties n=3032 Metro n=825 Micro n=637 Rural n=1610 Establishment Births *** 4.699*** 5.324*** 1.978*** Establishment Deaths *** *** Establishment Births*Deaths ** ** ** Bartik Demand Shock *** ** Lagged Employment Growth, *** 0.035*** ** Log Employment *** * *** Log Income *** ** Population Density *** 0.123*** Creative Class Employment Share *** * Arts Employment Share *** ** * Share with Bachelor's Degree or Higher, *** 0.376*** 0.338** 0.432*** Lagged Population Growth, *** * 3.211* Median Age *** *** *** Amenity Score 0.077* 0.153** ** Distance to Nearest MSA *** Constant R-Squared ** *** (back)