CREAT: Census Research Exploration and Analysis Tool

Demographic Origins of the Startup Deficit

July 2019

Working Paper Number:

CES-19-21

Abstract

We propose a simple explanation for the long-run decline in the startup rate. It was caused by a slowdown in labor supply growth since the late 1970s, largely pre-determined by demographics. This channel explains roughly two-thirds of the decline and why incumbent firm survival and average growth over the lifecycle have been little changed. We show these results in a standard model of firm dynamics and test the mechanism using shocks to labor supply growth across states. Finally, we show that a longer startup rate series imputed using historical establishment tabulations rises over the 1960-70s period of accelerating labor force growth.

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:
demand, macroeconomic, growth, employ, startup, entrepreneurship, labor, recession, employment growth, trend, economically, firm dynamics, regressing, employment dynamics, declining, decade, trends labor, trends employment

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Bureau of Labor Statistics, Ordinary Least Squares, Total Factor Productivity, County Business Patterns, Federal Reserve Bank, Census Bureau Longitudinal Business Database, Longitudinal Business Database, Federal Reserve System, Retirement History Survey, Decennial Census, North American Industry Classification System, Census Bureau Business Register, Business Dynamics Statistics

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