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Rand study examines the effect of policy on entrepreneurship and small businesses
Date:12/11/2007

An improved understanding of the effects of regulation on small businesses will help lawmakers develop policy designed to advance entrepreneurship, according to a new RAND Corporation report.

The Kauffman-RAND Institute for Entrepreneurship Public Policy report provides an overview of the ways that regulation and the legal system can discourage or encourage the entrepreneurial spirit. It also examines how specific regulations in four key areas -- health insurance, workplace safety, corporate governance and business organization -- have affected small business.

Small businesses (those with fewer than 500 employees) are an important feature of the U.S. political and economic landscape, accounting for almost half of all gross revenues generated by U.S. business, employing half of all private-sector workers and generating 60 percent to 80 percent of net new jobs.

It is vital to consider how the legal and regulatory environment influences small businesses and the ways in which that influence differs from that on large businesses, said Susan Gates, director of Kauffman-RAND Institute.

Unfortunately, some regulations place a disproportionate burden on small businesses, said Gates, a senior economist at RAND, a nonprofit research organization. At the same time, exemptions and other special regulatory treatment for small businesses designed to ease this burden dont always work.

Studies from the first three years of the of Kauffman-RAND Institutes research are summarized in the new report, In the Name of Entrepreneurship" The Logic and Effects of Special Regulatory Treatment for Small Businesses.

The report finds that the regulatory environment affects small business differently from the way it affects large ones, sometimes leading to unintended negative consequences.

For example, the research found no evidence that state health-insurance mandates designed to expand access to health insurance for small
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Contact: Jessica Goldings
MEDIA@RAND.ORG
703-413-1100
RAND Corporation
Source:Eurekalert

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