An ampirical assessment of the contribution of small business employment to US State economic performance

Small business proponents regularly couple their arguments for favorable go vernment policies and reduced tax and regulatory burdens, to the presumed b enefits of increased proportions of small versus large-sector employment. T hough regularly espoused at both the state and national level, these presum ptions regarding the benefits of small business employment remain an empiri cal issue. Are the presumed benefits a reality? A panel analysis of 48 U.S. States for a ten-year period was used to evaluate the contribution of smal l businesses to growth in productivity, growth in Gross State Product (GSP) , unemployment, and wage inflation at the state level. The system of simult aneous equations revealed that states with higher proportions of very small business employment do indeed experience higher levels of productivity gro wth, and Gross State Product growth, while having less wage inflation and l ower unemployment rates.