Entrepreneurship and business formation are important elements of a state’s economic health. Because previous research has shown that student loan debt discourages entrepreneurship, it seems likely—though not yet quantitatively assessed—that efforts to reduce debt (e.g., merit-based scholarship programs) might encourage entrepreneurship. Examining this possibility has important public policy implications, as many states have adopted broad, merit-based scholarship programs that drastically reduce the net, or out-of-pocket, costs of college; states also encourage entrepreneurship as an economic development strategy.
This project seeks to understand whether the merit-based HOPE Scholarship increases the rate of new business formation and, if so, in what types of regions (urban versus rural) and which groups of merit aid recipients (demographic characteristics) show effects. The interdisciplinary project team of the Georgia Institute of Technology’s Paige Clayton, the University of Georgia’s Susan Cohen, and Georgia State University’s Ross Rubenstein will use a regression discontinuity design, comparing students that are right above and right below the GPA required to obtain and maintain merit aid, to test their hypothesis.
The project combines University System of Georgia standard data with new business registration data from the Georgia Secretary of State and other data sources, like National Establishment Time-Series (NETS) data. This analysis provides a descriptive understanding of the incidence of merit-based scholarship recipient entrepreneurship versus non-recipient entrepreneurship, exploring differences in patterns across student demographics (such as gender, race and ethnicity, and household income) and geographic region.
- What is the incidence of merit-based scholarship recipient entrepreneurship versus non-recipient entrepreneurship, including patterns across student demographics (gender, race and ethnicity, household income) and geography?
- Are there differences in business formation among merit aid recipients and non-recipients, both overall and disaggregated by gender, race and ethnicity, household income, and geographic region?