Events

Motivated by the accelerated decline in US entrepreneurship in the past two decades, and using a unique panel dataset of US households, we theoretically and empirically analyze the economy-wide effects of increased product market competition through low-cost import penetration on household entrepreneurial activity. Our study is unique in documenting the asymmetric inter-sectorial shifts in entrepreneurial activity between (trade) exposed and non-exposed sectors. Greater import competition reduces especially business entry in exposed sectors by individuals with low occupational skills (for example, those in routine task-intensity service occupations or exhibiting high occupational mobility), but it increases entry by highly educated individuals in high-skill non-exposed sectors. The results are robust to several alternative hypotheses based on long-run trends in US entrepreneurship and labor market specialization, local collateral and credit shocks, long-run bank distress effects, and dynamic feedback effects.