Self-employment effects on regional growth: a bigger bang for a buck?

Abstract

Economic development policies often revolve around supporting small businesses and new firm creation as they are locally grown and likely can be more influenced by state and local policy. Two prominent strands of current research-the regional economic growth and small business/entrepreneurship literatures-elucidate the importance of small, young firms for regional economic performance and the crucial role urban-rural proximity plays in the distribution of growth across space. Keeping these two research traditions in mind, we study the effects of self-employment on job growth in US counties. Our goal is to estimate the net employment spillovers from changes in self-employment (SE) and to compare them to spillovers from changes in wage and salary employment (WS). We ask the following research questions: Do exogenous net changes (shocks) in SE spur larger or smaller changes in employment than do equal changes in WS employment and do these effects vary across the rural-urban hierarchy? The answers to these questions are of paramount importance in devising economic development strategy across urban and rural settings. We use a differencing strategy and an exogenous measure of SE and WS employment shocks to estimate net multiplier effects and to investigate their relationship with proximity to differing-sized urban centers. The analysis uses US county-level data spanning the 2001-2013 period. The results confirm the importance of self-employment for job creation, supporting both more SE and WS employment. Distance from urban centers generally offers protection that promotes SE growth but hinders WS employment growth. In an austere fiscal environment, spending a dollar to stimulate SE is likely to have greater returns as opposed to stimulating WS employment.

Local Rates of New Firm Formation: An Empirical Exploration Using Swedish Data

“…Fritsch and Wyrwich (2017) study German regions, finding a significant long-run effect of start-up activity on job growth. Other recent studies find similar results (Tsvetkova et al, 2019;Lee (2017). Tsvetkova et al (2019) compare the local employment effects from exogenous net changes in self-employment with similar changes in regular wage employment in US counties.…”

“…Various explanations have been put forth for why new and small firms are especially important for local economies including their propensity to buy inputs locally, their profits remain local, and it signals future growth opportunities in the local economy. Finally, Tsvetkova et al (2019) find that small and new business formation is linked to much larger local job and income multipliers than equivalent changes for existing businesses. Taken together, this motivates analyzing the drivers of the local rate of new firm formation.…”

Self - Employment Among Youths in Ojo and Alimosho LGA, Lagos Nigeria: Perceptions, Attitude and Contributions – A Statistical Assessment

“…Ayalew & Zeleke (2018) and Afolabi, Kareem, Okubanjo, Ogunbanjo, & Aninkan (2017) also found a similar effect. The study also found that the development of self -employment will significantly improve the standard of living and growth of the economy which aligned with findings from other reseraches Tsvetkova, Partridge, & Betz, 2016;Fields, 2014;Goetz & Rupasingha, 2013;Bashir, Gebremedhin, & Fletcher, 2011;Startienė & Remeikienė, 2013). However, Goetz, Fleming, & Rupasingha (2012) noted that self -employment may have little or no benefit for the local and national economy as it may just be a temporary measure for those laid off or job seekers till their condition improves.…”

“…Somefun (2014) in his discourse submitted that self -employment must be given an imperative place if the nation must revitalise its economy and reduce the choking high rate of unemployment which is in agreement with the assertion of the youths and that of other studies (Ogunrinola, 2011). This implies that self -employment increases local, regional and national income, reduce unempliyment through job provision and improve the standard of living of the citizens by lifting them out of poverty (Tsvetkova, Partridge, & Betz, 2016;Fields, 2014;Goetz & Rupasingha, 2013;Bashir, Gebremedhin, & Fletcher, 2011) Table 4 shows that 86.3% of the youths agreed that lack of strong patent law is a challenge to self -employed development, high cost of doing business (88.9%), and lack of knowledge of entrepreneurship in the basic science and technology (72.9%). Also, other challenges to self -employment include lack of patronage of local products (92.7%), lack of conducive environment (77.5%) and lack of constant power supply (75.2%).…”

The geography of Swedish SMEs’ investments

“…As the second step, we calculate average investmentcash flow sensitivity measures (β1 in Equation 7) for each functional region in Sweden (56 total) 10 . To derive regional values, we estimate Equation 7separately by region.…”