CREAT: Census Research Exploration and Analysis Tool

The Role of Start-Ups in StructuralTransformation

January 2016

Working Paper Number:

CES-16-38

Abstract

The U.S. economy has been going through a striking structural transformation'the secular reallocation of employment across sectors'over the past several decades. We propose a decomposition framework to assess the contributions of various margins of firm dynamics to this shift. Using firm-level data, we find that at least 50 percent of the adjustment has been taking place along the entry margin, owing to sectors receiving shares of start-up employment that differ from their overall employment shares. The rest is mostly the result of life cycle differences across sectors. Declining overall entry has a small but growing effect of dampening structural transformation.

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:
market, manufacturing, growth, employ, merger, acquisition, labor, sector, shift, employment growth, trend, bank, firm dynamics, sectoral, employment dynamics, declining, decline, relocation

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:
Federal Reserve Bank, Longitudinal Business Database, Federal Reserve System, Business Dynamics Statistics, Census Bureau Business Dynamics Statistics

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