The relationship between entrepreneurial activity and domestic gross state in-migration patterns in the U.S

Abstract

Using the Kauffman indices of entrepreneurial activity, which effectively have been entirely overlooked in the domestic migration literature to date, this study seeks to investigate the relationship between entrepreneurial activity and domestic gross in-migration in the U.S. and whether that relationship is bi-directional. The two-part hypothesis being investigated here is that: (a) greater entrepreneurial activity in a state leads to a greater domestic gross in-migration rate, ceteris paribus, and (b) a greater domestic gross in-migration rate induces an increase in entrepreneurial activity, ceteris paribus. After including a number of control variables, luding geographic cost-of-living differentials and an index of aggregate labour market freedom, the most germane of the empirical findings obtained here, based on panel VAR estimation and Granger causality tests, is that the gross state-level in-migration rate in the U.S. has positively impacted the level of entrepreneurial activity. However, there is no compelling evidence that entrepreneurial activity influenced state-level gross in-migration. These results for domestic migration appear to be compatible with previous studies of international immigration to the U.S. and entrepreneurship.