Business Density, Entrepreneurship and Economic Well-Being

Abstract

This paper attempts to relate the economic well-being to business density, defined as the number of business firms per 1,000 persons. Using 50 United States business/firm data and macroeconomic data, this paper provides literature rationales and statistical testing results that demonstrate the significant linkage between business density and economic well-being at the state level. The paper estimates that increasing 1 percent of business density escalates personal income, household income and tax revenue by more than 1 percent. Especially, the test indicates the impact of women business ownership to be more robust in improving economic well-being. Problems facing economically disadvantaged groups still remain. Tremendous potentials exist in the nation for small business ownership and entrepreneurship, proven to be the most effective vehicles to achieve economic efficiency and equality. Productive government policy can be the key to turn on the effective vehicles and to excavate the potentials for improving the nation's economic well-being.