We examine the contribution to economic growth of entrepreneurial “marketplace information” within a regional endogenous growth framework. Entrepreneurs are posited to provide an input to economic growth through the information revealed by their successes and failures. We empirically identify this information source with the regional variation in establishment births and deaths, which create geographic information asymmetries that influence subsequent entrepreneurial activity and economic growth. We find that local establishment birth and death rates are significantly and positively correlated with subsequent entrepreneurship for US counties. To account for the potential endogeneity caused by forward-looking entrepreneurs, we utilize instruments based on historic mining activity. We find that the information spillover component of local establishment birth and death rates have significant positive effects on subsequent entrepreneurship and employment growth for US counties and metropolitan areas. With the help of these intruments, we show that establishment births have a positive and significant effect on future employment growth within all counties, and that in line with the information hypothesis, local establishment death rates have a similar positive effect within metropolitan counties.

No abstract

Forthcoming in The Oxford Handbook of American Economic History, edited by ed. Louis Cain, Price Fishback and Paul Rhode. We thank Robert Margo and Evan Roberts for useful conversations about data collection and Walker Hanlon for comments on the draft. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

We thank the Ziman Center for Real Estate at UCLA for generous funding. We would like to thank Nicolai Kuminoff and Jaren Pope for helpful comments. This research was supported by Award Number T32AG033533 from the National Institute on Aging. The content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institute on Aging or the National Institutes of Health The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.© 2014 by Devin Bunten and Matthew E. Kahn. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. ABSTRACTIn the typical asset market, an asset featuring uninsurable idiosyncratic risk must offer a higher rate of return to compensate risk-averse investors. A home offers a standard asset's risk and return opportunities, but it also bundles access to its city's amenities|and to its climate risks. As climate change research reveals the true nature of these risks, how does the equilibrium real estate pricing gradient change when households can sort into different cities? When the population is homogeneous, the real estate pricing gradient instantly reflects the "new news". With population heterogeneity, an event study research design will underestimate the valuation of climate risk for households in lowrisk cities while overestimating the valuation of households in high-risk areas.

Highly productive U.S. cities are characterized by high housing prices, low housing stock growth, and restrictive land-use regulations (e.g., San Francisco). While new residents would benefit from housing stock growth in cities with highly productive firms, existing residents justify strict local land-use regulations on the grounds of congestion and other costs of further development. This paper assesses the welfare implications of these local regulations for income, congestion, and urban sprawl within a general-equilibrium model with endogenous regulation. In the model, households choose from locations that vary exogenously by productivity and endogenously according to local externalities of congestion and sharing. Existing residents address these externalities by voting for regulations that limit local housing density. In equilibrium, these regulations bind and house prices compensate for differences across locations. Relative to the planner's optimum, the decentralized model generates spatial misallocation whereby high-productivity locations are settled at too-low densities. The model admits a straightforward calibration based on observed population density, expenditure shares on consumption and local services, and local incomes. Welfare and output would be 1.4% and 2.1% higher, respectively, under the planner's allocation. Abolishing zoning regulations entirely would increase GDP by 6%, but lower welfare by 5.9% because of greater congestion. * Email: devin.bunten@frb.gov. I am deeply indebted to the support of Leah Boustan, Matt Kahn, and Pierre-Olivier Weill. I would also like to thank Dora Costa, Pablo Fajgelbaum, Walker Hanlon, and other participants in the economic history and macroeconomics proseminars at UCLA.