Entrepreneurship, Mines, and Urban Growth

There is a well established correlation between initial entrepreneurship and subsequent employment growth across metropolitan areas. This relationship is true when modelling entrepreneurship through average establishment size or through the prevalence of startups; the relationship also holds at the industry level within cities. These patterns are often taken as evidence that entrepreneurship promotes city success. Spatial di¤erences in initial entrepreneurship are unlikely to be exogenous, however, which bedevils interpretation. Chinitz (1961) hypothesized that industrial legacies explain why some cities are less entrepreneurial than others. He particularly keyed in on industries like steel in Pittsburgh that are very dependent upon natural resources and possess large …rms that depress entrepreneurship. We follow this idea by looking at the spatial location of mines across the U.S. at the start of the 20th century. We …nd that greater historical mining deposits are strongly correlated with reduced entrepreneurship in the middle of the 20th century. The link between entrepreneurship and local employment growth persists when instrumenting initial entrepreneurship with historical mines. These e¤ects are evident in industrial clusters that are not directly related to mining, such as trade, …nance and services. They are also present in cities with warm climates, suggesting that these results do not simply re‡ect the Rust Belt’s decline. JEL Classi…cation: L0, L1, L2, L6, N5, N9, O1, O4, R0, R1. Key Words: Entrepreneurship, Industrial Organization, Chinitz, Agglomeration, Clusters, Cities, Mines. Comments are appreciated and can be sent to [email protected] and [email protected]. We thank Alex Field, Alex Klein, and Gavin Wright for their guidance with respect to historical data sources. Kristina Tobio provided excellent research assistance. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no con…dential information is disclosed. Support for this research at the Boston RDC from NSF (ITR-0427889) is also gratefully acknowledged.