3.1.1. Local Employment Portfolio—The Core Variables of Interest

Average wage and salary employment is selected as the measure of risk–return tradeoff in the county because, as a frequently used employment-based measure, it follows trends in incomes as well as in population and tax revenue in the county [4]. This makes wage and salary employment an appropriate variable for investigating risk and return trade-off.

Risk is measured, based on the conventional definition, as the standard deviation of annual wage and salary employment growth (WSE-Risk) during the selected timeframe. The data for annual wage and salary employment growth are obtained from the Regional Economic Information System (REIS) at the Bureau of Economic Analysis (BEA), U.S. Department of Commerce, 1969–2016.

Growth is defined as the average annual wage and salary employment growth (WSE-Growth) in the county during the selected timeframe(s).

Growth squared is defined as the average annual wage and salary employment growth squared (WSE-Growth Squared) in the county during the selected timeframe(s).

The composition and character of the local labor market takes several years to change, and subsequently influence the local businesses in an average county. The timeframes selected in the study were around ten years on average (longer in a few instances), in order to encapsulate these changes and their subsequent manifestations in the survival of local businesses.
