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Who Gains from Creative Destruction? Evidence from High-Quality Entrepreneurship in the United States

Author

Listed:
  • Astrid Marinoni
  • John Voorheis

Abstract

The question of who gains from high-quality entrepreneurship is crucial to understanding whether investments in incubating potentially innovative start-up firms will produce socially beneficial outcomes. We attempt to bring new evidence to this question by combining new aggregate measures of local area income inequality and income mobility with measures of entrepreneurship from Guzman and Stern (2017). Our new aggregate measures are generated by linking American Community Survey data with the universe of IRS 1040 tax returns. In both fixed effects and IV models using a Bartik-style instrument, we find that entrepreneurship increases income inequality. Further, we find that this increase in income inequality arises due to the fact that almost all of the individual gains associated with increased entrepreneurship accrue to the top 10 percent of the income distribution. While we find mixed evidence for small positive effects of entrepreneurship lower on the income distribution, we find little if any evidence that entrepreneurship increases income mobility.

Suggested Citation

  • Astrid Marinoni & John Voorheis, 2019. "Who Gains from Creative Destruction? Evidence from High-Quality Entrepreneurship in the United States," Working Papers 19-29, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:19-29
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    File URL: https://www2.census.gov/ces/wp/2019/CES-WP-19-29.pdf
    File Function: First version, 2019
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    More about this item

    Keywords

    entrepreneurship; innovation; income inequality;

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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