Government loan guarantees for small businesses have the effect of depressing income growth, according to a study of 3,035 US counties from 1980 to 2009 by Andrew T. Young of West Virginia University and three colleagues. For the average county, a $3.43 per capita increase in Small Business Administration loans is associated with a cumulative decrease in annual income-growth rates of about 2pc. Small firms tend not to be engines of growth. Past studies have found that most people who become small-business owners do so not to introduce new ideas but to satisfy a personal desire for autonomy.

(Source: National Bureau of Economic Research)

Published in Dawn, Economic & Business, December 29th, 2014