The Hometown Advantage Is Not Gone—It Has Changed
The question behind the US local bias of entrepreneurship is not whether Americans stopped caring about home. It is what changed in the economic value of being known, financed, and monitored in one's birthplace. The answer supported by the evidence is precise: the relative birthplace concentration of broad self-employment has faded, while the local relationships that can help some founders obtain capital and build larger firms remain possible. Understanding that distinction keeps the conclusion useful without turning it into either a mobility triumph or a story of regional decline.
What has faded, exactly?
The US measure records an additional probability. It compares the share of self-employed people living in their state of birth with the share among comparable wage-and-salary workers. That benchmark matters because many people, regardless of occupation, have ties to where they were born. LBE isolates the entrepreneurial excess over that common pattern.
The excess was large in 1970 and much smaller by the most recent period studied. Among US-born white men, the gap was about 8 percentage points in 1970, about 3 points in 2000, and around 2 points in 2014–2018. For all US-born people, it fell from about 6 points in 1970 to less than 1 point by 2000 and approached zero in 2014–2018, with a slightly negative latest point estimate. The result appears for both incorporated and unincorporated businesses and when the analysis is limited to full-time status.
This is a real historical change in relative location choice. It is not, however, a count of entrepreneurs who left home. A falling LBE could occur because self-employed people moved more, because wage workers became more mobile in a way that narrowed the gap, because the kinds of people entering self-employment changed, or because the types of firms being created changed. The measure uses current residence and birthplace; it does not record the timing, destination, or reason for a move.
Nor does a near-zero LBE mean that local entrepreneurship disappeared. A large number of self-employed people may still live in their birth state if wage workers do so at similar rates. Local customers, suppliers, employees, and lenders can remain important even when entrepreneurs are no longer more locally concentrated than workers. The US study also concerns the broad population of self-employed and small-business owners, not only high-growth founders who relocate to a prominent technology ecosystem. Those mobile founders are part of entrepreneurship, but they are not a substitute for the population the measure actually describes.
The difference between the white-men estimate and the all-US-born estimate reinforces the need for care. The white-men series retains a positive and statistically significant LBE in the latest period, whereas the broader estimate is near zero or slightly negative. The study documents this heterogeneity but does not assign it one definitive cause. It would be unwarranted to turn the contrast into a simple story about culture, race, or mobility. The evidence establishes that the change is uneven across populations, and that the aggregate result depends on who receives weight in the calculation.
The most accurate statement is therefore not “American entrepreneurs have become mobile.” It is: self-employment has become less unusually tied to birthplace relative to wage work. That change can reflect more choice about where to operate, a different composition of self-employment, less need for local financing, or some combination. The title's “fading” refers to the weakening of a relative hometown advantage, not to the end of place-based opportunity.
The mechanism behind the change
Why would birthplace have generated an entrepreneurial advantage in the first place? The Italian evidence supplies the clearest mechanism. A local founder may be legible to lenders and other institutions through reputation, relationships, and knowledge of the local market. A lender may be better able to assess a person whose history is known, monitor a firm that remains nearby, and use social pressure or community reputation to reduce concerns about repayment. These ties can function as regional-specific collateral even when they are not formal assets.