In today’s globalized economy, many regions face what economists call trade shocks, often in the form of a flood of cheap overseas imports. Cheap imports can be a good thing for consumers over the short term, but they can also create lower economic growth and lead to major job losses among U.S. based manufacturers—just ask anyone living regions long dependent on the textile or furniture industries, which have now moved most of their production overseas. These regions, and many others who saw local jobs overseas, now struggle to replace lost jobs and rebuilding a more stable and resilient local economy.
New research from Penn State University economists finds that a strong base of local entrepreneurs helps on this front. The study found that communities with higher levels of local self-employment do a better job of responding to trade shocks. The researchers, Jiaochen Lang and Stephan Goetz, suggest that self-employed workers are more flexible and adaptive, responding more effectively in the face of economic shocks. While this finding represents only one data point, it does suggest that fostering local entrepreneurship should be a core part of regional strategies to promote economic resilience and sustainability. (The article, “Self Employment and Trade Shock Mitigation,” appears in Small Business Economics (September 2015). The abstract can be accessed for free; full article access requires a fee.)