Monday, November 1, 2010

Small Businesses Are NOT the Engine of Job Growth

Earlier this year, while proposing a $30 Billion Small Business Lending Fund, the president said:
"This will help small banks do even more of what our economy needs – and that's ensure that small businesses are once again the engine of job growth in America."

To be fair, this has been the mantra for Republicans as well as Democrats. But it is wrong. In the most comprehensive study to date, Haltiwanger, Jarmin and Miranda use census data to conclude:
"... our main finding is that once we control for firm age there is no systematic relationship between firm size and growth."

I try to remain open to arguments that the SBA is not just another expensive boondoggle and that politicians are not just pandering to contributors and voters, but it is becoming increasingly difficult.

1 comment:

  1. Young businesses drive job growth. Young businesses are typically small. Creating programs to help "new" businesses would effective achieve the same ends, but be more difficult to manage.