Demographic Origins of the Startup Deficit
45 Pages Posted: 9 Jun 2019
There are 2 versions of this paper
Demographic Origins of the Startup Deficit
Demographic Origins of the Startup Deficit
Date Written: May 21, 2019
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.
Keywords: Firm Dynamics, Demographics, Business Dynamism, Macroeconomics
JEL Classification: J11, E24, D22
Suggested Citation: Suggested Citation