When people think of the most famous startup success stories, companies located in Silicon Valley or various metropolitan centers are likely to come to mind. New research, however, has found that people working for themselves in rural areas may be just as responsible as those larger companies, if not more so, in helping their local economy. The number of self-employed workers in local communities helps to predict personal income, job growth and declines in family poverty levels, researchers found.
"We often look at self-employment as a stopgap measure, something done out of desperation," Stephan Goetz, a professor of agricultural economics and regional economics at Pennsylvania State University, said, "but, in fact, self-employment has a tangible effect in raising income growth and lowering poverty."
This is because self-employed workers are responsible for performing a variety of important jobs and as a result have become a large part of their local economies.
"They can be the people who mow your lawn and shovel your walk. But they can also be more-innovative entrepreneurs, like the person with a new technology idea or someone who is manufacturing medical equipment," said Goetz, who also is director of the Northeast Regional Center for Rural Development and conducted the research in collaboration with a federal bank analyst.
Overall, the research found, the number of self-employed workers in non-metro counties grew 93 percent from 1969 to 2009. At the same time, the number of farm owners in those areas decreased nearly 40 percent. In other words, as a linchpin of local economies diminished over the past four decades, workers turned to other measures, notably self-employment. This consequently has led to the benefits found in the research.
"Community leaders usually are thinking about big companies, and there's a mind-set that economic development comes from the outside -- recruiting auto manufacturers and big stores, for example," Goetz said. "But leaders should also celebrate local businesses and look at the self-employed, in addition, as important to the economy."
(In urban areas, the number of self-employed workers helped economic performance but did not help lower poverty levels, the researchers found.)
Goetz and Anil Rupasingha, research economist and policy adviser at the Federal Reserve Bank of Atlanta, examined data from the Bureau of Economic Analysis from a mix of 3,000 metro and non-metro regions. Their research was published in an online edition of Papers in Regional Science.
Reach BusinessNewsDaily staff writer David Mielach at Dmielach@techmedianetwork.com. Follow him on Twitter @D_M89.