Knowledge that Transforms

In this article we explore the effects of labor demand shifts and population adjustments across metropolitan areas on the employment and earnings of various demographic groups during the 1980s. We find that population shifts across areas at least partially offset the effects of these demand shifts, but less‐educated workers showed substantially lower population adjustments in response to these demand shifts. These limited supply responses apparently contributed importantly to relatively greater deterioration of employment and earnings of these groups in declining areas during the 1980s.

We use data from the National Longitudinal Surveys to investigate the relative importance of family financial and human capital in the transition into self-employment. Specifically, we estimate the impacts of individual's own wealth and human capital and parental wealth and self-employment experience on the probability that an individual transits from wage-and-salary to self-employment. We find young men's own financial assets exert a statistically significant but quantitatively modest effect on the transition. In contrast, the parents' capital exerts a large influence. Parents' strongest effect runs, not through financial means, but rather through their own self-employment experience and business success.