Self-employment effects on regional growth: a bigger bang for a buck?
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This paper estimates the net employment spillovers from changes in self-employment (SE) and compares them to spillovers from changes in wage and salary (WS) employment using US county-level data. Our findings offer a policy-relevant perspective on the relative importance of SE and WS employment and help bridge two entrepreneurship research traditions. Our estimated effects of self-employment, at the margin, are substantially larger than identical effects of paid employment. This supports the literature that points to a special role played by self-employed businesses in economic growth. At the same time, the little attention given to SE as a potential engine of growth among policymakers and scholars can be explained, at least in part, by the relatively small total economic impact of self-employment stemming from its small share of the economy. In an austere fiscal environment, however, spending a dollar to stimulate SE is likely to have greater returns as opposed to stimulating WS employment, assuming the costs of adding one SE and one WS job are comparable.
KeywordsSelf-employment Entrepreneurship Employment growth Urban-rural hierarchy
JEL classificationJ21 O18 R11 R12
We appreciate the partial support of USDA AFRI grant no. 11400612 “Maximizing the Gains of Old and New Energy Development for America’s Rural Communities.”
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