Why Are Startups Important for the Economy?

Abstract: Startups come in all shapes and sizes. While small in number, a small group of successful startups is important for understanding aggregate outcomes such as employment and productivity. In this article, we look at some distinguishing characteristics of startups and what makes them important for the aggregate economy. Furthermore, we dig into the cause behind the long-run decline in U.S. entrepreneurism and whether the recent pandemic broke these trends. While the recent surge in business applications seems encouraging at first, there are signs that it reflects a restructuring of the economy instead.

Keywords: entrepreneurs; startups; employment; business dynamism;

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2023-02

Volume: 23

Issue: 06