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Entrepreneurship and state economic growth

R.W. Hafer (Department of Economics, Southern Illinois University Edwardsville, Edwardsville, Illinois, USA)

Journal of Entrepreneurship and Public Policy

ISSN: 2045-2101

Article publication date: 19 April 2013

2113

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.

Keywords

Citation

Hafer, R.W. (2013), "Entrepreneurship and state economic growth", Journal of Entrepreneurship and Public Policy, Vol. 2 No. 1, pp. 67-79. https://doi.org/10.1108/20452101311318684

Publisher

:

Emerald Group Publishing Limited

Copyright © 2013, Emerald Group Publishing Limited

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