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Entrepreneurship and the fight against poverty in US cities

Lee, Neil and Rodríguez-Pose, Andrés ORCID: 0000-0002-8041-0856 (2020) Entrepreneurship and the fight against poverty in US cities. Environment and Planning A. ISSN 0308-518X

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Identification Number: 10.1177/0308518X20924422

Abstract

Entrepreneurship is often seen as the cure-all solution for poverty reduction. Proponents argue that it leads to job creation, higher incomes and lower poverty rates in the cities in which it occurs. Others argue that many entrepreneurs are actually creating low-productivity firms serving local markets. Yet, despite this debate, little research has considered the impact of entrepreneurship on poverty in cities. This paper addresses this gap using a panel of US cities for the period between 2005 and 2015. We hypothesize that the impact of entrepreneurship will depend on whether it is in tradeable sectors, so likely to have positive local multiplier effects, or non-tradeable sectors, which may saturate local markets. We find that entrepreneurship in tradeables reduces poverty and increases incomes for non-entrepreneurs, a result we confirm using an instrumental variable approach, taking the inheritance of entrepreneurial traits as the instruments. In contrast, while there are some economic benefits from non-tradeable entrepreneurship, we find these are not large enough to reduce poverty.

Item Type: Article
Official URL: https://journals.sagepub.com/home/epn
Additional Information: © 2020 The Authors
Divisions: Geography & Environment
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HT Communities. Classes. Races
JEL classification: M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M13 - Entrepreneurship
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J21 - Labor Force and Employment, Size, and Structure
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O18 - Regional, Urban, and Rural Analyses
R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, and Changes
Date Deposited: 16 Apr 2020 14:27
Last Modified: 29 Jul 2020 11:21
URI: http://eprints.lse.ac.uk/id/eprint/104073

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