The impact of infrastructure spending on new business formation: the importance of state economic development spending

Abstract

Results from this study suggest that states, in order to encourage new business formation and to compensate for unfavorable economic conditions, have budgeted more funds to support economic development agency activities. It is concluded that past studies, by failing to control for state economic development agency spending in estimated regression equations, have underestimated the impact of infrastructure spending and taxes on the formation of new businesses. Findings indicate that only after controlling for economic development agency spending do infrastructure spending and taxes enter the estimated regression equation with statistically significant coefficients and with the expected signs. -Author