Entrepreneurship and Urban Growth: An Empirical Assessment with Historical Mines
Measures of entrepreneurship, such as average establishment size and the prevalence of start-ups, correlate strongly with employment growth across and within metropolitan areas, but the endogeneity of these measures bedevils interpretation. Chinitz (1961) hypothesized that coal mines near Pittsburgh led that city to specialization in industries, like steel, with significant scale economies and that those big firms led to a dearth of entrepreneurial human capital across several generations. We test this idea by looking at the spatial location of past mines across the United States: proximity to historical mining deposits is associated with bigger firms and fewer start-ups in the middle of the 20th century. We use mines as an instrument for our entrepreneurship measures and find a persistent link between entrepreneurship and city employment growth; this connection works primarily through lower employment growth of start-ups in cities that are closer to mines. These effects hold in cold and warm regions alike and in industries that are not directly related to mining, such as trade, finance and services. We use quantile instrumental variable regression techniques and identify mostly homogeneous effects throughout the conditional city growth distribution.
Comments are appreciated and can be sent to firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org. Glaeser and W. Kerr are affiliates of the NBER. We thank Ajay Agrawal, Hoyt Bleakley, Mercedes Delgado, Xavier Giroud, Rick Hornbeck, Larry Katz, James Lee, John McHale, Debarshi Nandy, Tom Nicholas, László Sándor, Curtis Simon, Will Strange, Adam Storeyguard, Bob Strom, and seminar participants for very helpful comments; Alex Field, Alex Klein, and Gavin Wright for their guidance with respect to historical data sources; Chris Hansen for assistance with the IVQR methodology; the Sloan Foundation and The Taubman Center for State and Local Government for financial support; and Kristina Tobio for excellent research assistance. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed. Support for this research at the Boston RDC from NSF (ITR-0427889) is also gratefully acknowledged. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Edward L. Glaeser & Sari Pekkala Kerr & William R. Kerr, 2015. "Entrepreneurship and Urban Growth: An Empirical Assessment with Historical Mines," The Review of Economics and Statistics, MIT Press, vol. 2(97), pages 498-520, May. citation courtesy of