Who Gains From Creative Destruction? Evidence From High-Quality Entrepreneurship in the United States

Astrid Marinoni and John Voorheis

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: The question of who gains from high-quality entrepreneurship is crucial to understanding whether investments in innovative startup firms produce socially beneficial outcomes. Although entrepreneurship is widely viewed as a central driver of economic growth, recent research has raised concerns that it may also exacerbate inequality and other undesirable social outcomes. We bring new evidence to this debate by analyzing the impact of entrepreneurship on a variety of local economic outcomes, including income inequality, average incomes, and income mobility, using IRS and U.S. Census Bureau microdata. We find that entrepreneurship indeed increases income inequality, although this effect fades over time. While entrepreneurship produces statistically significant income gains across the distribution, the economic magnitude of these effects varies dramatically, with benefits concentrated among top earners. We also find that entrepreneurship serves as an important mobility tool for less well-off individuals, positively increasing their probability of rising to the top of the income distribution. These mobility effects are strong for Asian, Hispanic, and foreign-born individuals, but are less evident among Black individuals.

Keywords: entrepreneurship; innovation; income inequality (search for similar items in EconPapers)
JEL-codes: D63 L26 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-ent, nep-ino, nep-lab and nep-tid
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Citations: View citations in EconPapers (9)

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https://www2.census.gov/ces/wp/2019/CES-WP-19-29.pdf First version, 2019 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:19-29

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