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An Analysis of the Relationship Between New Firm Formation and Economic Development in the Northeast Region of the United States

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Author Info

  • Saima Bashir

    ()
    (Department of Resource Management, West Virginia University)

  • Tesfa Gebremedhin

    ()
    (Department of Resource Management, West Virginia University)

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    Abstract

    The overall objective of this study is to provide policy makers with information on the role of new firm formation in the economic development in the Northeast region of the United States. This study identifies and estimates the impacts of new firm formation in the economic development of the Northeast region. The empirical model of this study is derived from the three-equation simultaneous model of Deller et al. (2001). In this study, Three Stage Least Squares (3SLS) method is used to estimate the simultaneous equations model. The research findings indicate that population density and per capita income have a positive link with new firm formation. Higher population density and per capita income encourage entrepreneurs to start new firms in the region. This leads to an increase of new jobs, which is a positive contribution to economic development in the Northeast region.

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    Bibliographic Info

    Paper provided by Regional Research Institute, West Virginia University in its series Working Papers with number 201102.

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    Length: 29 pages
    Date of creation: Feb 2011
    Date of revision:
    Handle: RePEc:rri:wpaper:201102

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    Web page: http://rri.wvu.edu/research/working-papers/
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    Related research

    Keywords: New Firm Formation; economic development; northeast region; simultaneous analysis;

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    References

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    1. Mills, Edwin S. & Price, Richard, 1984. "Metropolitan suburbanization and central city problems," Journal of Urban Economics, Elsevier, vol. 15(1), pages 1-17, January.
    2. Josep Arauzo Carod & Daniel Liviano Solís & Mònica Martín Bofarull, 2008. "New business formation and employment growth: some evidence for the Spanish manufacturing industry," Small Business Economics, Springer, vol. 30(1), pages 73-84, January.
    3. Zoltan Acs & Pamela Mueller, 2006. "Employment effects of business dynamics: Mice, Gazelles and Elephants," Papers on Entrepreneurship, Growth and Public Policy 2006-23, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    4. Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 227-45, September.
    5. Richard Florida & Zoltan Acs & Sam Youl Lee, 2004. "Creativity and Entrepreneurship: A Regional Analysis of New Firm Formation," Papers on Entrepreneurship, Growth and Public Policy 2004-17, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    6. Pamela Mueller & André Stel & David Storey, 2008. "The effects of new firm formation on regional development over time: The case of Great Britain," Small Business Economics, Springer, vol. 30(1), pages 59-71, January.
    7. Kirchhoff, Bruce A. & Phillips, Bruce D., 1988. "The effect of firm formation and growth on job creation in the United States," Journal of Business Venturing, Elsevier, vol. 3(4), pages 261-272.
    8. Schmitz, James A, Jr, 1989. "Imitation, Entrepreneurship, and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 721-39, June.
    9. Rui Baptista & Vítor Escária & Paulo Madruga, 2008. "Entrepreneurship, regional development and job creation: the case of Portugal," Small Business Economics, Springer, vol. 30(1), pages 49-58, January.
    10. David Audretsch & Michael Fritsch, 2002. "Growth Regimes over Time and Space," Regional Studies, Taylor & Francis Journals, vol. 36(2), pages 113-124.
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