From the Office of Advocacy of the SBA:
Small business is a big contributor to the nation’s economy, generating 50 percent of the private, nonfarm gross domestic product (GDP), according to a study released today by the Office of Advocacy of the U.S. Small Business Administration. The study covers the period 1998 – 2004, and confirms the findings of earlier research.
You can find the full report here.
I’ve raised this issue before, but I have trouble accepting the estimate that small business accounts for 50% of gdp. Small business — under 500 employees — account for roughly 50% of employment. But wages per employee in large firms is roughly one third higher and revenues per employee in large firms is about 60% higher. This strongly implies that output per employee in large firms is significantly higher. Given that large firms account for almost the same number of employees as small firms this implies that large firms share of gdp should be significantly higher.
When I scanned the article I see that they deal with this issue by assuming that a significant portion of large firms output is purchased from small firms and this offset the larger revenues and payroll per employee. Maybe, but I would love to see some evidence to support this assumption.
If it is true that output per employee is higher in small firms this should be reflected in higher wages per employee.
Moreover, at the end of the study the authors report that this study implies that small businesses in several industries are experiencing negative productivity growth– an extremely unlikely development. This conclusion strongly implies that there is something significantly wrong with the methodology of the study.