Entrepreneurship and state economic growth

Rik W. Hafer

80 citations0/0 files storedJournal of Entrepreneurship and Public Policy

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Entrepreneurship Studies and Influences Economic Growth and Productivity Firm Innovation and Growth

Abstract

Purpose The purpose of this paper is to test whether entrepreneurship is a significant factor in explaining economic growth at the state level. Design/methodology/approach This paper, unlike previous work, uses the Kauffman Index of Entrepreneurial Activity (KIEA) as the measure of entrepreneurial activity. Based on standard growth regressions using real per capita gross state product, real per capita personal income and employment growth, we test for the independent role that entrepreneurial activity may have on state economic growth. Findings We find that an increase in the level of entrepreneurial activity is robustly associated with an increase in economic growth. Such findings reinforce calls for policy changes at the state level that promote more productive entrepreneurship. Research limitations/implications These conclusions are tentative. The findings are based on the growth of the 50 states over a relatively short period. A longer data set would be preferable, if data were available. Moreover, the author has not attempted to distinguish between different categories of entrepreneurship, for example productive and unproductive entrepreneurship. Practical implications Such findings reinforce calls for policy changes at the state level that promote more productive entrepreneurship. This would include, among others, changes such as reducing or eliminating state income taxes and setting strict limits on the government's use of eminent domain and environmental property takings. Originality/value The study uses the Kauffman Index of Entrepreneurial Activity (KIEA), arguably a superior measure of state‐level entrepreneurial activity, to explain state economic growth. The topic is timely and the results have important policy implications.

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References

1956A Contribution to the Theory of Economic Growth 1988On the mechanics of economic development 2003The Theory of Economic Development 1986Increasing Returns and Long-Run Growth 1990Endogenous Technological Change 1992A Contribution to the Empirics of Economic Growth 1989Endogenous Technological Change 1921Risk, Uncertainty and Profit

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