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Community Development

The Impact of Locally Owned Businesses on Local Economic Well-Being

The concept of "economic gardening"—supporting locally owned businesses over nonlocally owned businesses and small businesses over large ones—has gained traction as a means of economic development since the 1980s. However, there is no definitive evidence for or against this pro-local business view. Anil Rupasingha, a research economist at the Atlanta Fed, looks at the impact of locally owned businesses on overall local economic well-being in a new paper from the Federal Reserve Bank of Atlanta's Community and Economic Development Discussion Paper series. This paper finds that in communities where a higher percentage of employment comes from locally owned businesses, especially businesses with nine employees or less, there is stronger income and employment growth. The research further shows that a greater degree of locally owned business employment is more likely to reduce the poverty rate, especially in nonmetropolitan areas. While there is still much to explore about the types of locally owned businesses and other dynamics that yield positive economic outcomes for communities, this research offers insights for policymakers and practitioners exploring a pro-local business view.