Entrepreneurship and the fight against poverty in US Cities

Neil Lee and Andrés Rodríguez-Pose

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Entrepreneurship is sometimes portrayed as a cure-all solution for poverty reduction. Proponents argue it leads to job creation, higher incomes, and lower poverty rates in the cities in which it occurs. Others, by contrast, posit that many entrepreneurs are actually creating low-productivity firms serving local markets. Yet, despite this debate, little research has considered the impact of entrepreneurship on poverty in cities. This paper addresses this gap using a panel of US cities for the period between 2005 and 2015. We hypothesise that the impact of entrepreneurship depends on whether it occurs in tradeable sectors – and, therefore, is more likely to have positive local multiplier effects – or non-tradable sectors, which may saturate local markets. We find that entrepreneurship in tradeables reduces poverty and increases incomes for non-entrepreneurs. The result is confirmed using an instrumental variable approach, employing the inheritance of entrepreneurial traits as an instrument. In contrast, while there are some economic benefits from non-tradeable entrepreneurship, we find these are not large enough to reduce poverty.

Keywords: entrepreneurship; poverty; cities; economic development; USA (search for similar items in EconPapers)
JEL-codes: J21 J31 M13 O18 R11 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2020-05
New Economics Papers: this item is included in nep-ent, nep-lma and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://eprints.lse.ac.uk/104384/ Open access version. (application/pdf)

Related works:
Journal Article: Entrepreneurship and the fight against poverty in US cities (2021)
Working Paper: Entrepreneurship and the fight against poverty in US cities (2021)
Working Paper: Entrepreneurship and the fight against poverty in US Cities (2020)
Working Paper: Entrepreneurship and the fight against poverty in US Cities (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:104384

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