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Does Local Business Ownership Insulate Cities from Economic Shocks?

  • Kolko, Jed


    (Public Policy Institute of California)

  • Neumark, David


    (University of California, Irvine)

We assess a prominent argument for local economic policies that favor locally-owned businesses – namely, that locally-owned firms are more likely to internalize the costs to the community of decisions to reduce employment and hence help to insulate cities from adverse economic shocks. We test this argument by examining how establishment-level employment responses to economic shocks are affected by establishment ownership. We find evidence hat some types of local ownership do insulate regions from economic shocks, although the clearest benefits do not come from small, independent businesses, but instead from corporate headquarters and, to a lesser extent, from small, locally-owned chains.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4415.

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Length: 44 pages
Date of creation: Sep 2009
Date of revision:
Publication status: published in: Journal of Urban Economics, 2010, 67(1), 103-15
Handle: RePEc:iza:izadps:dp4415
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