Via Economix and Economist's View, I see the Center for Economic Policy and Research released a study (PDF) comparing small business sectors around the world. You might think that America -- distinguish, as politicians say, by our entrepreneurial spirit and our small businesses -- would rank extremely high. But it turns out that, by percentage, the US has one of the world's smallest small business sectors. How is that possible?
First, here's the graph provided by the CEPR comparing self-employment rates around the world:
Isn't America supposed to stand for unregulated free market freedom? How do we place below the entire continent of Europe? What's going on here?
The study suggests one possible reason could be (here it is again) health care. Since the US doesn't provide universal health care and the free market for insurance is prohibitively expensive, many Americans who might otherwise look to start a business instead join a company for the tax deductible employer-provided health benefits.
I know there's a lot of skepticism about whether whether employer-provided insurance really hinders American's entrepreneurship, so another explanation might turn to corporate tax rates. It's widely reported that America has one of the world's highest statutory corporate tax rates, but our effective tax rate is actually much lower than many of the countries with higher self-employment rates. As this GAO report (PDF) shows, whether you look at countries with low effective tax rates (like Ireland and Switzerland) or high rates (France, Canada, Germany, Italy), all the named countries have higher rates of self-employment.