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Who Hires Whom? Entrepreneurial Backgrounds and Labor Market Opportunities

Author

Listed:
  • Josh Feng
  • Xavier Jaravel

Abstract

What are the implications of unequal access to entrepreneurial careers for labor markets? Using data from the U.S. Census and LinkedIn profiles, we document that entrepreneurs are significantly more likely to hire workers from similar social backgrounds (gender, race, age, education, etc.). These effects are quantitatively large across several demographic dimensions. For example, female employee share at female-founded startups is 36.4pp higher after controlling for industry-by-metro area-by-cohort fixed effects, with corresponding estimates of 51.2pp for Blacks, 37.3pp for Hispanics, and 11.3pp for non-college individuals. Large effects are present in high-growth startups, across industries and occupations, and remain stable across new firm cohorts. In addition, we find that these differences persist out to at least 20 years. We use wage data and an AKM research design to untangle whether the relative differences are driven by labor demand or labor supply effects. We find that demand drives the differences: group-specific wage decompositions show that new firms pay higher relative wages to individuals from similar backgrounds to the entrepreneur. Using these estimates, we calibrate a model of entrepreneurship with heterogeneous ability and production functions, and assess the impacts on relative wage from reducing access barriers to entrepreneurship.

Suggested Citation

  • Josh Feng & Xavier Jaravel, 2026. "Who Hires Whom? Entrepreneurial Backgrounds and Labor Market Opportunities," Working Papers 26-45, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:26-45
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    References listed on IDEAS

    as
    1. 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.
    2. Kim, J. Daniel, 2018. "Is there a startup wage premium? Evidence from MIT graduates," Research Policy, Elsevier, vol. 47(3), pages 637-649.
    3. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    4. Alex Bell & Raj Chetty & Xavier Jaravel & Neviana Petkova & John Van Reenen, 2019. "Who Becomes an Inventor in America? The Importance of Exposure to Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 647-713.
    5. Edward L. Glaeser & Naomi Hausman, 2020. "The Spatial Mismatch between Innovation and Joblessness," Innovation Policy and the Economy, University of Chicago Press, vol. 20(1), pages 233-299.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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