Risk, Recessions, and Resilience: Towards Sustainable Local Labor Markets through Employment Portfolio Analysis

Bharman Gulati and Stephan Weiler
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Bharman Gulati: Department of Economics, Colorado State University, Fort Collins, CO 80523, USA

Sustainability, 2021, vol. 13, issue 14, 1-20

Abstract: This paper explores the role of local labor market dynamics on the survival of new businesses. The characteristics of the local labor market are likely to influence the survival of new businesses, the level of entrepreneurship, and the resilience of the regional economy. We apply portfolio theory to evaluate employment-based and income-based measures of risk-and-return trade-offs in local labor markets on new business survival in the United States. Our results show that volatility in local labor markets has a positive impact on new business survival, especially in Metropolitan Statistical Areas. The results are robust across different timeframes, including during economic downturns, thus highlighting the contribution of new businesses in developing the resilience of the local economy, and further promoting sustainable regional economic development.

Keywords: business survival; economic resilience; employment portfolio; risk–return tradeoff (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:13:y:2021:i:14:p:7926-:d:595080

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