Abstract
The idea that local social capital yields economic benefits is fundamental to theories of agglomeration, and central to claims about the virtues of cities. However, this claim has not been evaluated using methods that permit confident statements about causality. This paper examines what happens to firms that become affiliated with one highly-connected local individual defined as a “dealmaker.” We adopt a quasi-experimental approach, which examines firms which added exactly one new individual to their firm combining difference-in-differences and propensity score matching to address selection and identification challenges,. The results indicate that, when compared to a control group, firms who link to one highly-connected local dealmaker are rewarded with substantial gains in employment and sales.
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