Overview
The US local bias of entrepreneurship measures how much more often self-employed people live in their birth state than comparable wage workers. This series traces its decline from 1970 to 2014–2018, links the earlier advantage to local information-sensitive finance and firm scale, and follows a major shift toward lower-capital self-employment. Composition and finance-portability explanations fit the evidence, but the US data do not establish a complete causal decomposition or show that local entrepreneurship disappeared.
Learning outcomes
- US self-employment became less unusually tied to birthplace relative to comparable wage work from 1970 to 2014–2018.
- Italian evidence associates local founders with more credit, capital, employment, and larger firms, but does not prove locality alone causes those outcomes.
- US self-employment shifted from high-startup-capital industries toward lower-capital activity; this fits, but does not prove, the decline mechanism.
- A lower LBE does not show that entrepreneurs simply moved more or that local entrepreneurship disappeared.
Keywords
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PlansFAQ
What does the US local bias of entrepreneurship measure?
It measures the extra probability that US-born self-employed people aged 18–65 live in their birth state compared with comparable wage-and-salary workers. It is a relative location gap, not a count of entrepreneurs who moved.
Why can birthplace help a founder build a larger firm?
Birthplace can provide local information, reputation, relationships, and access to lenders assessing and monitoring an uncertain venture. Italian evidence associates local status with more bank finance, capital, employment, and larger firms, without proving birthplace alone causes those outcomes.
Why did the US local bias of entrepreneurship decline?
The documented shift away from high-startup-capital self-employment fits a reduced need for locally mediated finance. More portable finance, greater mobility, changing attachment, or selection could also contribute; the evidence does not provide a complete causal decomposition.
When is staying local more valuable than moving?
Staying local is more valuable when startup capital and information-sensitive finance bind; moving is more valuable when a better market or employer outweighs rebuilding local relationships. The evidence offers no universal winner.