WASHINGTON, D.C. – Small firm establishment births are the most important factor propelling growth in gross state product, state personal income, and total state employment. These findings are contained in a study released today by the Office of Advocacy of the U.S. Small Business Administration.

“This study confirms the importance of small startups for the economic well-being of every state,” said Office of Advocacy Chief Economist, Dr. Chad Moutray. “Now more than ever, state policymakers should be aware of how their decisions affect small business. Creating an environment that values entrepreneurship and risk-taking is sure to increase economic growth, personal income, and employment.”

Small Business and State Growth: An Econometric Investigation, written by Donald Bruce, John Deskins, Brian Hill, and Jonathan Rork with funding from the Office of Advocacy, uses newly available U.S. Census Bureau data to analyze the impact of small firm establishment births and closures on state economies. The data became available through a program partially funded by the Office of Advocacy.

The study used data covering the years 1988 to 2002 and examined a wide variety of factors influencing state economic growth. After controlling for many determinants of growth, the authors conclude that in order to increase gross state product, state personal income, and total state employment, “the most fruitful policy option available to state governments is to establish and maintain a fertile environment for new establishment formations.”

Dr. Moutray presented the study at the National Association of Regional Councils’ National Conference of Regions 2007, where he served as a panelist.

The Office of Advocacy, the “small business watchdog” of the federal government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats, and it funds research into small business issues.