Working Paper: NBER ID: w18333
Authors: Edward L. Glaeser; Sari Pekkala Kerr; William R. Kerr
Abstract: 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.
Keywords: entrepreneurship; urban growth; historical mines; employment growth; instrumental variables
JEL Codes: L0; L1; L2; L6; N5; N9; O1; O4; R0; R1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Proximity to historical mineral and coal deposits (L72) | Larger average establishment sizes (L25) |
| Larger average establishment sizes (L25) | Lower levels of entrepreneurship (L26) |
| Proximity to historical mineral and coal deposits (L72) | Lower levels of entrepreneurship (L26) |
| Larger average establishment sizes (L25) | Urban employment growth (R23) |
| Share of employment in startups (M13) | Urban employment growth (R23) |
| Proximity to historical mineral and coal deposits (L72) | Urban employment growth (R23) |