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posted on 02 August 2015

The Financing Experiences Of Nonemployer Firms

by Atlanta Fed

More than 80 percent of businesses in the United States are nonemployer firms, meaning that they have no employees besides the owner. Together, they make up just 3 percent of annual business receipts, but they contribute to economic activity in other ways that are not captured in aggregate statistics.

From a societal standpoint, self‐employment is an important source of alternative income and provides a possible path up the economic ladder. The option can be especially important among those whose employment options are limited due to language barriers, lack of formal education, or a need for flexible work arrangements. Three demographic groups with increasing self‐employment rates, for example, are women, minorities, and immigrants (Survey of Business Owners 2002 and 2007). From a macroeconomic perspective, nonemployers are an important starting point for many larger firms. Not only do they serve as a proving ground for ideas (Dunn and Holtz‐Eakin 1996), but they also have much higher rates of creation and destruction than employer firms do. High levels of "dynamism" have been linked to both productivity and employment growth in the overall economy (Decker, Haltiwanger, Jarmin, and Miranda 2014).

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