Gentrification and Pioneer Businesses

Little is known about where hotspots of gentrification emerge within a city, and the role that some types of businesses play in the process. We develop a method to detect the sectors whose presence heralds the process of gentrification in a neighborhood. We show that these sectors, mostly found in cultural and creative industries, help to anticipate neighborhood change and that their predictive power complements that of traditional gentrification determinants. We also examine mechanisms related to amenities, worker characteristics, and signaling, which are consistent with these results. The analysis illustrates the importance of businesses in the socio-demographic dynamics of neighborhoods.