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Small Business Economics of the Lakota Fund on the Native American Indian Reservation

Author

Listed:
  • Benson, David A.

    () (Duke University)

  • Lies, Aaron

    () (University of Memphis)

  • Okunade, Albert A.

    () (University of Memphis)

  • Wunnava, Phanindra V.

    () (Middlebury College)

Abstract

Poverty rates on Native American Indian reservations are triple the US average. Small business incubation programs, available elsewhere in the US, are sparse on the reservations. Small businesses are potent drivers of US economic growth. Some 25.5 million entrepreneurs generate more than 50% of the GDP, are 26% of the exporters, and create 80% of the total net new job formation. The Small Business Administration (SBA), an independent agency of the federal government created in 1953, maintains and strengthens the nation's economy by aiding, counseling, assisting, and protecting the interests of small businesses and by assisting families and businesses to recover from national disasters. SBA services hardly exist on the Native American Indian Reservations (NAIRs), however. Studies have linked micro entrepreneurial activities to economic growth and poverty reduction. Our study tests the effects of the Lakota Fund (LF), a small business development initiative, on the NAIRs to determine whether SBA-like programs (loans, training, and consulting) can improve economic conditions on the NAIRs. The LF, a private micro loan and business training initiative on the Pine Ridge Reservation in South Dakota, is tested for its effectiveness in generating income. The 1980-2006 annual county-level data (Shannon Co. is 'treatment', Todd Co. is 'control') are a natural experiment; the counties are similar otherwise. Using the real per capita income (RPCI) dependent variable, and controlling for other factors, our regression results indicate that the LF initiative and its duration (intensity) raised RPCI significantly ? suggesting the success of a privately funded small business incubation initiative targeted at isolated impoverished groups within the highly developed US economy. Suggestions for future research and program replication ideas are explored.

Suggested Citation

  • Benson, David A. & Lies, Aaron & Okunade, Albert A. & Wunnava, Phanindra V., 2009. "Small Business Economics of the Lakota Fund on the Native American Indian Reservation," IZA Discussion Papers 3933, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3933
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    References listed on IDEAS

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    1. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
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    More about this item

    Keywords

    Small Business Administration; Lakota Fund; poverty rates; life expectancy; public sector;

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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