Spyridon Lagaras, University of Illinois-Urbana-Champaign
Margarita Tsoutsoura, Washington University-St. Louis
Abstract: The recent pandemic accelerated a paradigm shift in labor markets towards nontraditional employment arrangements, with flexibility increasingly developing into a critical differentiating factor. We study the impact of the “Great Reshuffling” on transitions into entrepreneurship using administrative data from U.S. tax returns. We find a large increase in entry to entrepreneurship, particularly for women and women with dependents. We examine the role of childcare disruptions, remote work availability, and displacement, finding support in favor of the pandemic-driven increase in childcare responsibilities as a primary factor. We show that transitions are persistent and lead to higher income for women. The pandemic shifted the composition of firms in the economy towards digital retail stores. Firms started by women survive more and have higher profitability. Overall, the results indicate that the pandemic shifted individuals’ preferences towards work.
Discussant: Maddalena Ronchi, Northwestern University
Abstract: I show that venture capital market shocks have real consequences for high-skill knowledge workers. Plausibly exogenous shocks to local VC increase local startup hiring but also increase startup labor turnover. Workers that join startups in hotter VC markets are less likely to remain at the firm and more likely to leave the universe of VC-backed firms within two years. While job duration in hot markets falls across occupations, effects on career advancement differ by role: STEM workers who enter booming VC markets advance slower in seniority in the following two to five years, while Business workers are less affected. I show that differences in technology-skill specificity across occupations can explain this heterogeneity. The results indicate that shocks to risk capital can have lasting effects on knowledge worker careers.
Discussant: Tong Liu, Massachusetts Institute of Technology
Vrinda Mittal, University of North Carolina-Chapel Hill
Abstract: This paper studies the relationship between the growth in private capital markets and the rise in economic inequalities over the last two decades in the U.S. First, we document that the share of financing raised by early-stage companies from U.S.-based high-net-worth individuals (HNWIs) tripled from 2004 to 2022. Second, exploiting state-level variation in exposure to the expansion of the federal capital gains tax exemption on qualified small business stock (QSBS), we find that HNWIs’ growing participation in private capital markets increased the income gap between HNWIs and other income earners by 7.6%. Third, we show that the rise in income concentration appears to be driven by HNWIs’ excess returns on their early-stage investments relative to public stock market returns. Finally, using counterfactual simulations, we find that HNWIs’ excess returns on these investments accounted for 11% and 5% of the growth in the top 1% share of income and wealth, respectively, from 2010 to 2019.
Discussant: Joan Farre-Mensa, University of Illinois-Chicago
