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Archive: August 2009

Smallest Small Business Sector

Nathan Lane and I have a new CEPR report out today: "An International Comparison of Small Business Employment." We review the most recent available data from the Organization for Economic Cooperation and Development and find that, by every measure, the United States has the smallest or close-to-smallest small business sector in a sample of 22 of the world's rich, democratic countries.

The United States, for example, has the second lowest share of self-employed workers in the total work force:

Figure showing OECD self-employment rates in 2007

And U.S. manufacturing has the third lowest share of enterprises with fewer than 20 employees. (The United States is at or near the bottom no matter where you make the cutoff --10, 20, up to 500 employees.)

Figure showing OECD self-employment rates in 2007

One thing that the rest of the countries with bigger small-business sectors have in common is universal health care. People thinking about going into business on their own in the United States have to worry about where they and their employees will get health insurance. Potential entrepreneurs who are older, or have pre-existing conditions, or are women of child-bearing age face even bigger barriers. Small business owners in the rest of the rich world don't have to think twice about how they'll be getting their health insurance.

UPDATE 08/10/09: Paul Krugman had a nice blog post on our paper. And Dean Baker wrote an excellent column on it for the Huffington Post, which prompted over 350 comments.

UPDATE 08/12/09: Another blog post at the New York Times web site, this time by Catherine Rampell at the Economix blog. And another, at Mark Thoma's Economist's View. The comments at all four sites are worth a read. Lots of personal stories about how the U.S. health-care system blocked or ended a small business.