Small Business Economics

, Volume 1, Issue 1, pp 7–20 | Cite as

Small business economics

  • William A. Brock
  • David S. Evans


The paper presents an overview of small-business economics. Small businesses are shown to comprise a substantial and expanding segment of the U.S. economy. The role of small businesses in the economy is considered from the standpoint of various economic theories of the size distribution of firms. Firm-size related empirical regularities are reviewed and their implications for economic theory is discussed. Several small-business policy issues are discussed, including the role of small businesses in labor, macroeconomic, and regulatory policies, along with a review of research on small-business economics that might help guide these policies.


Economic Theory Small Business Industrial Organization Policy Issue Regulatory Policy 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Acs, Z., Audretsch, D., and Carlsson, B., 1988, ‘Flexible Technology and Firm Size’, RPIE Working Paper, 1988, Case Western Reserve University.Google Scholar
  2. Balkin, S., in press, Self-Employment for Low Income People, New York: Praeger Press.Google Scholar
  3. Bendick, M. and Egan, M., 1987, ‘Transfer Payment Diversion for Small Business Development: British and French Experience’, Industrial and Labor Relations Review (July), 522–542.Google Scholar
  4. Birch, D., 1979, The Job Generation Process, Cambridge, MA.: Center for the Study of Neighborhood and Regional Change, Massachusetts Institute of Technology.Google Scholar
  5. Blau, D., 1987, ‘A Time Series Analysis of Self-Employment’, Journal of Political Economy 95 (June), 445–467.Google Scholar
  6. Brock, W., 1988, ‘The role of Small Business in Macroeconomics and Finance’, unpublished, Department of Economics, University of Wisconsin.Google Scholar
  7. Brock, W. and Evans, D., 1986, The Economics of Small Businesses: Their Role and Regulation in the U.S. Economy, New York: Holmes and Meier.Google Scholar
  8. Brock, W. and Evans, D., 1985, ‘The Economics of Regulatory Tiering’, Rand Journal of Economics 16 (Autumn), 398–409.Google Scholar
  9. Bulow, J. and Summers, L., 1986, ‘A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination, and Keynesian Unemployment’, Journal of Labor Economics 4 (April), 376–414.Google Scholar
  10. Brown, C. and Medoff, J., 1985, ‘The Employer Size Wage Effect’, unpublished paper.Google Scholar
  11. Dunne, T., Roberts, M., and Samuelson, L., 1987, ‘The Impact of Plant Failure on Employment Growth in the U.S. Manufacturing Sector’, unpublished paper, Pennsylvania State University.Google Scholar
  12. Evans, D., 1986, ‘The Differential Effect of Regulations across Plant and Firm Sizes’, Journal of Law and Economics (April).Google Scholar
  13. Evans, D., 1987, ‘Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries’, Journal of Industrial Economics (June).Google Scholar
  14. Evans, D., 1987, ‘Tests of Alternative Theories of Firm Growth’, Journal of Political Economy (August).Google Scholar
  15. Evans, D. and Leighton, L., 1987, Self-Employment Selection and Earnings over the Lifecycle, Washington, D.C.: U.S. Small Business Administration.Google Scholar
  16. Evans, D. and Leighton, L., 1988, ‘Why Do Smaller Firms Pay Less’, Department of Economics, Fordham University.Google Scholar
  17. Evans, D. and Leighton, L., 1988, ‘Some Empirical Aspects of Entrepreneurship’, Department of Economics, Fordham University.Google Scholar
  18. Evans, D. and Jovanovic, B., in press, ‘Estimates of a Model of Entrepreneurial Choice under Liquidity Constraints’, Journal of Political Economy.Google Scholar
  19. Fazzari, S., Hubbard, R., and Peterson, B., 1987, ‘Financing Constraints and Corporate Investment’, NBER Working Paper No. 2387, Cambridge, MA.: National Bureau of Economic Research.Google Scholar
  20. Hall, B., 1987, ‘The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector’, Journal of Industrial Economics 35 (June), 567–581.Google Scholar
  21. Jovanovic, B., 1982, ‘Selection and Evolution of Industry’, Econometrica 50(3), 649–670.Google Scholar
  22. Kihlstrom, R. and Laffont, J., 1979, ‘A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion’, Journal of Political Economy 59, 719–48.Google Scholar
  23. Klepper, S. and Graddy, E., 1985, ‘Industry Evolution and the Determinants of Market Structure’, unpubl. paper, Carnegie Mellon University.Google Scholar
  24. Knight, F., 1921, Risk, Uncertainty, and Profit, New York: Houghton Mifflin.Google Scholar
  25. Krueger, A. and Summers, L., 1988, ‘Efficiency Wages and the Inter-Industry Wage Structure’, Econometrica 56, 259–294.Google Scholar
  26. Leonard, J., 1986, ‘On the Size Distribution of Employment and Establishments’, NBER Working Paper No. 1951, Cambridge: National Bureau of Economic Research.Google Scholar
  27. Lucas, R., 1967, ‘Adjustment Costs and the Theory of Supply’, Journal of Political Economy (August), 321–34.Google Scholar
  28. Lucas, R., 1978, ‘On the Size Distribution of Business Firms’, Bell Journal of Economics 9, 508–23.Google Scholar
  29. Marshall, A., 1961, Principles of Economics, London: Macmillan and Company.Google Scholar
  30. Mills, D., 1984, ‘Demand Fluctuations and Endogenous Firm Flexibility’, Journal of Industrial Economics (September), 55–71.Google Scholar
  31. Pakes, A. and Ericson, R., 1987, ‘Empirical Implications of Alternative Models of Firm Dynamics’, unpublished paper, Department of Economics, University of Wisconsin.Google Scholar
  32. Scherer, F., 1980, Industrial Market Structure and Economic Performance (2d ed.), Boston: Houghton Mifflin.Google Scholar
  33. Schumpeter, J., 1961, The Theory of Economic Development, New York: Oxford University Press (reprint of 1934 edition).Google Scholar
  34. Schumpeter, J., 1950, Capitalism, Socialism, and Democracy (3d. ed.), New York: Harper and Row.Google Scholar
  35. Shephard, W., 1982, ‘Causes of Increased Competition in the Economy, 1939–1980’, Review of Economics and Statistics (November), 613–626.Google Scholar
  36. Simon, H. and Bonini, C., 1958, ‘The Size Distribution of Business Firms’, American Economic Review 48, 607–17.Google Scholar
  37. Stiglitz, J., 1987, ‘The Causes and Consequences of the Dependence of Quality on Price’, Journal of Economic Literature 25 (March), 1–48.Google Scholar
  38. Thaler, R., 1987, ‘The January Effect’, Journal of Economics Perspectives 1 (Summer), 197–201.Google Scholar
  39. Thaler, R., 1987, ‘Seasonal Movements in Security Prices II: Weekend, Holiday, Turn of the Month, and Intraday Effects’, Journal of Economics Perspectives 1 (Fall), 169–177.Google Scholar
  40. Uchitelle, L., 1988, ‘Reliance on Temporary Jobs Hints at Economic Fragility’, New York Times, March 16, 1988, p. 1.Google Scholar
  41. U.S. Deparment of Commerce, various years, Statistical Abstracts, Washington, D.C.: Government Printing Office.Google Scholar
  42. U.S. Department of Commerce, 1972, Historical Statistics of the United States from Colonial Times to 1970, Washington, D.C.: Government Printing Office.Google Scholar
  43. U.S. Small Business Administration, various years, The State of Small Business, Washington, D.C.: Government Printing Office.Google Scholar

Copyright information

© Kluwer Academic Publishers 1989

Authors and Affiliations

  • William A. Brock
    • 1
    • 2
  • David S. Evans
    • 1
    • 2
  1. 1.Department of EconomicsUniversity of Wisconsin at MadisonMadisonUSA
  2. 2.Department of EconomicsFordham UniversityBronxUSA

Personalised recommendations