Saturday, February 24, 2018

Venture Capital and Economic Growth

Does venture capital help private sector growth? 

Figure 1 below reports venture-capital investments per business establishment in all 50 states, over a period of eight years: 2009-2016 (columns, right-hand axis). For comparison, real private-sector growth rate is also reported (line, left-hand axis) for the same period of time, and also for all 50 states. The 400 resulting pairs of data are then grouped by deciles, from highest to lowest amount of venture capital per business establishment.

Figure 1

Sources: State Science and Technology Institute (Venture capital); Bureau of Labor Statistics (Business establishments); Bureau of Economic Analysis (State private-sector growth).

The correlation is imperfect, but does suggest that states that attract considerable amounts of venture capital relative the size of their private sector, tend to see more growth in their private sector. 

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