Entrepreneurship Key to Poverty Reduction
U2's Bono is the only one championing the cause of startups in the fight for poverty reduction and sustainable economic growth--and it isn't restricted to Africa or emerging economies either. A new study by the Goldwater Institute points to a "strong connection between a state's rate of entrepreneurship and declines in poverty"--put simply, more entrepreneurs equals less poverty.
The Arizona-based institute examined state-level data from 2001-2007 and found that each percentage point increase in the rate of entrepreneurship in a state corresponded to a 2 percent decline in the poverty rate.
The five states with the largest reductions in the poverty rate during those years averaged a 25 percent reducation--Hawaii (-34.21), North Dakota (-32.61), Arkansas (-22.47), New Mexico (-22.22) and Idaho (-13.91). At the opposite end of the spectrum, the three states with the highest increase in poverty during those years--Delaware, Indiana and Wisconsin--also happened to be the three states with the lowest rates of entrepreneurship.
The study's author, Stepen Slivinsky, calls for policymakers to put a priority on promoting entrepreneurial growth and suggests lowering tax burdens as a principal approach. slivinsky points to data from the Goldwater study that shows "for every 1 percentage point increase in the tax burden, there's a corresponding 1 percentage point drop in the entrepreneurship rate."