| Abstract: |
Poverty rates on Native American Indian reservations are triple the US
average. Small business incubation programs, available elsewhere in the US,
are sparse on the reservations. Small businesses are potent drivers of US
economic growth. Some 25.5 million entrepreneurs generate more than 50% of the
GDP, are 26% of the exporters, and create 80% of the total net new job
formation. The Small Business Administration (SBA), an independent agency of
the federal government created in 1953, maintains and strengthens the nation's
economy by aiding, counseling, assisting, and protecting the interests of
small businesses and by assisting families and businesses to recover from
national disasters. SBA services hardly exist on the Native American Indian
Reservations (NAIRs), however. Studies have linked micro entrepreneurial
activities to economic growth and poverty reduction. Our study tests the
effects of the Lakota Fund (LF), a small business development initiative, on
the NAIRs to determine whether SBA-like programs (loans, training, and
consulting) can improve economic conditions on the NAIRs. The LF, a private
micro loan and business training initiative on the Pine Ridge Reservation in
South Dakota, is tested for its effectiveness in generating income. The
1980-2006 annual county-level data (Shannon Co. is 'treatment', Todd Co. is
'control') are a natural experiment; the counties are similar otherwise. Using
the real per capita income (RPCI) dependent variable, and controlling for
other factors, our regression results indicate that the LF initiative and its
duration (intensity) raised RPCI significantly − suggesting the success of a
privately funded small business incubation initiative targeted at isolated
impoverished groups within the highly developed US economy. Suggestions for
future research and program replication ideas are explored. |