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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. Working Paper (44). International Inequalities Institute, London School of Economics and Political Science, London, UK.

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Abstract

Entrepreneurship is sometimes portrayed as a cure-all solution for poverty reduction. Proponents argue it leads to job creation, higher incomes, and lower poverty rates in the cities in which it occurs. Others, by contrast, posit 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 hypothesise that the impact of entrepreneurship depends on whether it occurs in tradeable sectors – and, therefore, is more likely to have positive local multiplier effects – or non-tradable sectors, which may saturate local markets. We find that entrepreneurship in tradeables reduces poverty and increases incomes for non-entrepreneurs. The result is confirmed using an instrumental variable approach, employing the inheritance of entrepreneurial traits as an instrument. In contrast, while there are some economic benefits from non-tradeable entrepreneurship, we find these are not large enough to reduce poverty.

Item Type: Monograph (Working Paper)
Official URL: http://www.lse.ac.uk/International-Inequalities
Additional Information: © 2020 The Authors
Divisions: Geography & Environment
International Inequalities Institute
Subjects: H Social Sciences > HN Social history and conditions. Social problems. Social reform
JEL classification: M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M13 - Entrepreneurship
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
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
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: 13 May 2020 14:12
Last Modified: 20 Aug 2020 18:06
URI: http://eprints.lse.ac.uk/id/eprint/104384

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