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The Role of Startups for Local Labor Markets

Gerald Carlino () and Thorsten Drautzburg

No 17-31, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: We investigate the dynamic response of local U.S. labor markets to increased job creation by new firms and compare the effects to overall labor demand shocks. To account for both dynamic and spatial dependence we develop a spatial panel VAR that builds on recent advances in the VAR literature to identify structural shocks using external instruments. We find that startup shocks have a small but persistent effect on local employment through population growth. Population growth, in turn, is largely driven by immigration. We also investigate how the responses differ by local characteristics such as population density. Finally, we show that startups are not closely linked to innovation.

Keywords: Startups; entrepreneurship; local labor markets; proxy VAR; spatial panel VAR (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-sbm, nep-tid and nep-ure
Date: 2017-09-27
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