Business dynamism, educational attainment, and residential location choice

Abstract

Using individual-level, geocode data from the National Longitudinal Survey of Youth's 1997 cohort, I ask whether business dynamism in local labor markets, defined as the rates of job creation and establishment entry, affects the location decisions of labor force participants, and I examine how effects differ for highly and less educated labor force participants. I find that a one standard deviation increase in business dynamism is associated with a 2%–4% increase in the probability a college graduate chooses a metropolitan statistical area and an 8%–15% decrease for high school graduates with no college experience. These results support recent findings documenting a decrease in responsiveness to local labor market conditions and suggest that incentivizing job creation in local labor markets may not be enough to offset the trend of declining internal migration in the United States.