Small Business Economics

, Volume 46, Issue 1, pp 45–56 | Cite as

Self-employment and trade shock mitigation

  • Jiaochen LiangEmail author
  • Stephan J. Goetz


This paper investigates the moderating effects of entrepreneurial activity on the impact of trade penetration. Entrepreneurs may help to mitigate adverse trade shocks through several mechanisms, i.e., more flexible output structure, diversified economic portfolio, and higher knowledge spillovers from trade-induced R&D activities. Our empirical work embeds the analysis of entrepreneurship, measured using self-employment rates, into a framework of international trade and local labor markets. The empirical results show that the marginal impacts of Chinese import penetration on job losses are dampened in localities with higher self-employment rates, which suggests self-employment or entrepreneurial activities can mitigate the adverse impacts of trade penetration from low-income countries. Our study provides a novel perspective on entrepreneurs’ benefits on economic well-being: Besides their direct contribution to economic growth documented in earlier research, they can also enhance the resilience of a local economy in the face of external shocks.


Self-employment Entrepreneurship Trade shocks Economic resilience 

JEL Classifications

L26 R11 F16 F61 



This work was funded in part under USDA NIFA grants 2012-70002-19385 and 2014-51150-22094, which the authors gratefully acknowledge. An earlier version of this paper was presented at the 2014 AAEA Annual Meeting in Minneapolis, MN. We thank session participants and especially moderator Mark Gibson for valuable comments. In addition, we are very grateful for constructive comments from the editor, and two anonymous referees.

Supplementary material

11187_2015_9677_MOESM1_ESM.docx (22 kb)
Supplementary material 1 (DOCX 21 kb)


  1. Acs, Z. J., Braunerhjelm, P., Audretsch, D. B., & Carlsson, B. (2008). The knowledge spillover theory of entrepreneurship. Small Business Economics, 32(1), 15–30. doi: 10.1007/s11187-008-9157-3.CrossRefGoogle Scholar
  2. Acs, Z. J., & Szerb, L. (2007). Entrepreneurship, economic growth and public policy. Small Business Economics, 28(2–3), 109–122. doi: 10.1007/s11187-006-9012-3.CrossRefGoogle Scholar
  3. Acs, Z. J., & Varga, A. (2005). Entrepreneurship, agglomeration and technological change. Small Business Economics, 24(3), 323–334. doi: 10.1007/s11187-005-1998-4.CrossRefGoogle Scholar
  4. Autor, D. H., Dorn, D., & Hanson, G. H. (2013). The China syndrome: Local labor market effects of import competition in the United States. American Economic Review, 103(6), 2121–2168. doi: 10.1257/aer.103.6.2121.CrossRefGoogle Scholar
  5. Bernard, A. B., Eaton, J., Jensen, J. B., & Kortum, S. (2003). Plants and productivity in international trade. The American Economic Review, 93(4), 1268–1290. doi: 10.2307/3132288.CrossRefGoogle Scholar
  6. Bernard, A., & Jensen, J. (1995). Exporters, Jobs, and wages in US manufacturing—1976–1987. Brookings Papers on Economic Activity, 1995(1995), 67–119. doi: 10.2307/2534772.CrossRefGoogle Scholar
  7. Bloom, N., Romer, P. M., Terry, S. J., & Van Reenen, J. (2013). A trapped-factors model of innovation. American Economic Review, 103(3), 208–213. doi: 10.1257/aer.103.3.208.CrossRefGoogle Scholar
  8. Borjas, G., & Ramey, V. (1995). Foreign competition, market power, and wage inequality. The Quarterly Journal of Economics, 110(4), 1075–1110. Retrieved from
  9. Boschma, R., & Frenken, K. (2011). The emerging empirics of evolutionary economic geography. Journal of Economic Geography, 11(2), 295–307. doi: 10.1093/jeg/lbq053.CrossRefGoogle Scholar
  10. Braunerhjelm, P., Acs, Z. J., Audretsch, D. B., & Carlsson, B. (2009). The missing link: Knowledge diffusion and entrepreneurship in endogenous growth. Small Business Economics, 34(2), 105–125. doi: 10.1007/s11187-009-9235-1.CrossRefGoogle Scholar
  11. Bustos, P. (2011). Trade liberalization, exports, and technology upgrading: Evidence on the impact of MERCOSUR on Argentinean firms. American Economic Review, 101(1), 304–340. doi: 10.1257/aer.101.1.304.CrossRefGoogle Scholar
  12. Chiquiar, D. (2008). Globalization, regional wage differentials and the Stolper–Samuelson theorem: Evidence from Mexico. Journal of International Economics, 74(1), 70–93. doi: 10.1016/j.jinteco.2007.05.009.CrossRefGoogle Scholar
  13. Davis, D. (1998). Does European unemployment prop up American wages? National labor markets and global trade. American Economic Review, 88(3), 478–494. doi: 10.1257/aer.96.5.1924.Google Scholar
  14. Dissart, J. C. (2003). Regional economic diversity and regional economic stability: Research results and agenda. International Regional Science Review, 26(4), 423–446. doi: 10.1177/0160017603259083.CrossRefGoogle Scholar
  15. Edmonds, E. V., Pavcnik, N., & Topalova, P. (2010). Trade adjustment and human capital investments: Evidence from Indian tariff reform. American Economic Journal: Applied Economics, 2(4), 42–75. doi: 10.1257/app.2.4.42.Google Scholar
  16. Eliasson, G. (1991). Deregulation, innovative entry and structural diversity as a source of stable and rapid economic growth. Journal of Evolutionary Economics,. doi: 10.1007/BF01202338.Google Scholar
  17. Frenken, K., Van Oort, F., & Verburg, T. (2007). Related variety, unrelated variety and regional economic growth. Regional Studies, 41(5), 685–697. doi: 10.1080/00343400601120296.CrossRefGoogle Scholar
  18. Fritsch, M. (2011). Start-ups in innovative industries: Causes and effects. In D. Audretsch, O. Falck, S. Heblich, & A. Lederer (Eds.), Handbook of research on innovation and entrepreneurship (pp. 365–381). Cheltenham: Edward Elgar Publishing Limited.Google Scholar
  19. Fritsch, M. (2013). New business formation and regional development: A survey and assessment of the evidence. Foundations and Trends in Entrepreneurship, 9(3), 249–364. doi: 10.1561/0300000043.CrossRefGoogle Scholar
  20. Fritsch, M., & Noseleit, F. (2013a). Indirect employment effects of new business formation across regions: The role of local market conditions. Papers in Regional Science, 92(2), 361–382. doi: 10.1111/j.1435-5957.2012.00475.x.CrossRefGoogle Scholar
  21. Fritsch, M., & Noseleit, F. (2013b). Investigating the anatomy of the employment effect of new business formation. Cambridge Journal of Economics, 37(2), 349–377. doi: 10.1093/cje/bes030.CrossRefGoogle Scholar
  22. Glaeser, E. L. (2007). Entrepreneurship and the city. National Bureau of Economic Research Working Paper Series, No. 13551(2140). doi: 10.3386/w13551.
  23. Glaeser, E. L., & Kerr, W. R. (2009). Local industrial conditions and entrepreneurship: How much of the spatial distribution can we explain? Journal of Economics and Management Strategy, 18(3), 623–663. doi: 10.1111/j.1530-9134.2009.00225.x.CrossRefGoogle Scholar
  24. Goetz, S. J., Partridge, M., Deller, S. C., & Fleming, D. A. (2010). Evaluating U.S. rural entrepreneurship policy. The Journal of Regional Analysis and Policy, 40(1), 20–33. Retrieved from
  25. Goetz, S. J., Partridge, M. D., Rickman, D. S., & Majumdar, S. (2011). Sharing the gains of local economic growth: Race-to-the-top versus race-to-the-bottom economic development. Environment and Planning C: Government and Policy, 29(3), 428–456. doi: 10.1068/c1077r.CrossRefGoogle Scholar
  26. Goetz, S. J., & Rupasingha, A. (2009). Determinants of growth in non-farm proprietor densities in the US, 1990–2000. Small Business Economics, 32(4), 425–438. doi: 10.1007/s11187-007-9079-5.CrossRefGoogle Scholar
  27. Goetz, S. J., & Shrestha, S. S. (2009). Explaining self-employment success and failure: Wal-mart versus starbucks, or Schumpeter versus Putnam. Social Science Quarterly, 90(1), 22–38. doi: 10.1111/j.1540-6237.2009.00600.x.CrossRefGoogle Scholar
  28. Gries, T., & Naudé, W. (2010). Entrepreneurship and structural economic transformation. Small Business Economics, 34(1), 13–29. doi: 10.1007/s11187-009-9192-8.CrossRefGoogle Scholar
  29. Hanson, G. H., & Slaughter, M. J. (2002). Labor-market adjustment in open economies evidence from US states. Journal of International Economics, 57(1), 3–29. doi: 10.1016/S0022-1996(01)00138-6.CrossRefGoogle Scholar
  30. Henderson, J., & Weiler, S. (2009). Entrepreneurs and job growth: Probing the boundaries of time and space. Economic Development Quarterly, 24(1), 23–32. doi: 10.1177/0891242409350917.CrossRefGoogle Scholar
  31. Holmes, T. J., & Stevens, J. J. (2014). An alternative theory of the plant size distribution, with geography and intra- and international trade. Journal of Political Economy, 122(2), 369–421. doi: 10.1086/674633.CrossRefGoogle Scholar
  32. Kandilov, I. T. (2009). The effects of trade with developing countries on the regional demand for skill in the U.S.: Evidence from county data. Journal of Regional Science, 49(3), 459–482. doi: 10.1111/j.1467-9787.2008.00606.x.CrossRefGoogle Scholar
  33. Kaufmann, R. K. (1993). An empirical exploration of the relation among diversity, stability, and performance in economic systems. Structural Change and Economic Dynamics, 4(2), 299–313. doi: 10.1016/0954-349X(93)90021-B.CrossRefGoogle Scholar
  34. Kirzner, I. M. (1997). Entrepreneurial discovery and the competitive market process: An Austrian approach. Journal of Economic Literature, XXXV, 60–85. doi: 10.2307/2729693.
  35. Kovak, B. K. (2013). Regional effects of trade reform: What is the correct measure of liberalization? American Economic Review, 103(5), 1960–1976. doi: 10.1257/aer.103.5.1960.CrossRefGoogle Scholar
  36. Krishna, P., Poole, J. P., & Senses, M. Z. (2012). Trade, labor market frictions, and residual wage inequality across worker groups. American Economic Review, 102(3), 417–423. doi: 10.1257/aer.102.3.417.CrossRefGoogle Scholar
  37. Krugman, P. R. (2008). Trade and wages, reconsidered. Brookings Papers on Economic Activity, 2008(1), 103–154. Retrieved from
  38. Leibenstein, H. (1968). Entrepreneurship and development. The American Economic Review, 58(2), 72–83. Retrieved from
  39. Leichenko, R., & Silva, J. (2004). International trade, employment and earnings: Evidence from US rural counties. Regional Studies, 38(4), 355–374. doi: 10.1080/03434002000213897.CrossRefGoogle Scholar
  40. Low, S. A., & Isserman, A. M. (2013). Where are the innovative entrepreneurs? Identifying innovative industries and measuring innovative entrepreneurship. International Regional Science Review,. doi: 10.1177/0160017613484926.Google Scholar
  41. Malizia, E. E., & Ke, S. (1993). The influence of economic diversity on unemployment and stability. Journal of Regional Science, 33(2), 221–235. doi: 10.1111/j.1467-9787.1993.tb00222.x.CrossRefGoogle Scholar
  42. Meckl, J. (2006). Does European unemployment prop up American wages? National labor markets and global trade: Comment. American Economic Review, 96(5), 1924–1930. doi: 10.1257/aer.96.5.1924.CrossRefGoogle Scholar
  43. Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725. doi: 10.1111/1468-0262.00467.CrossRefGoogle Scholar
  44. Qian, H., & Acs, Z. J. (2011). An absorptive capacity theory of knowledge spillover entrepreneurship. Small Business Economics, 40(2), 185–197. doi: 10.1007/s11187-011-9368-x.CrossRefGoogle Scholar
  45. Rupasingha, A., & Goetz, S. J. (2013). Self-employment and local economic performance: Evidence from US counties. Papers in Regional Science, 92(1), 141–161. doi: 10.1111/j.1435-5957.2011.00396.x.Google Scholar
  46. Schumpeter, J. A. (1934). The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle. Harvard economic studies (Vol. 46). New Brunswick: Transaction Publishers. doi: 10.2307/1812657.Google Scholar
  47. Silverberg, G., Dosi, G., & Orsenigo, L. (1988). Innovation, diversity and diffusion: A self-organisation model. Economic Journal,. doi: 10.2307/2233718.Google Scholar
  48. Stephens, H. M., & Partridge, M. D. (2011). Do entrepreneurs enhance economic growth in lagging regions? Growth and Change, 42(4), 431–465. doi: 10.1111/j.1468-2257.2011.00563.x.CrossRefGoogle Scholar
  49. Topalova, P. (2010). Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India. American Economic Journal: Applied Economics, 2(4), 1–41. doi: 10.1257/app.2.4.1.Google Scholar

Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.The Pennsylvania State UniversityUniversity ParkUSA
  2. 2.The Northeast Regional Center for Rural DevelopmentThe Pennsylvania State UniversityUniversity ParkUSA

Personalised recommendations