Comparing local employment portfolios against entrepreneurship, this paper finds local wage and salary job market prospects shape incentives for potential entrepreneurs. Entrepreneurship may thus be more attractive in areas featuring high employment risk and/or low returns. This paper contributes to the existing regional employment portfolio literature by using more disaggregated data, at both the county and commuting zone levels. Commuting zones in particular represent a broader spectrum of labor market agglomerations across both rural and urban areas to provide the most stringent and revealing tests of the inter-relationship between local employment portfolios and the choice to pursue entrepreneurship. We find a U-shaped risk/return tradeoff using employment variance and growth, consistent with the literature. We test our hypothesis with a model of regional entrepreneurship, incorporating the employment portfolio variables. This is the first known study to explore the hypothesized relationship between wage and salary employment portfolios and entrepreneurship, effectively synthesizing two previously disparate literatures.
Available at: http://works.bepress.com/sarah_low/3/