Search Results
Briefing
Why Are Startups Important for the Economy?
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 ...
Working Paper
The Local Origins of Business Formation
What locations generate more business ideas, and where are ideas more likely to turn into businesses? Using comprehensive administrative data on business applications, we analyze the spatial disparity in the creation of business ideas and the formation of new employer startups from these ideas. Startups per capita exhibit enormous variation across granular units of geography. We decompose this variation into variation in ideas per capita and in their rate of transition to startups, and we find that both components matter. Observable local demographic, economic, financial, and business ...
Discussion Paper
Does Income Inequality Affect Small Firms?
The share of income going to high-income households has increased significantly in the United States in recent decades. In 1980, the average income share of earners in the top 10 percent was around 30 percent. However, by 2015, it had surpassed 45 percent. The employment share of small firms has also declined, with a decrease of approximately 5 percentage points over the same period. In this post, we use variation across states to show a correlation between these two developments, with states having the greatest increase in the upper income share also tending to be those with the biggest job ...
Working Paper
High-Growth Firms in the United States: Key Trends and New Data Opportunities
Using administrative data from the U.S. Census Bureau, we introduce a new public-use database that tracks activities across firm growth distributions over time. With these new data, we uncover several key trends for high-growth firms---critical engines of innovation and economic growth. First, the share of firms that are high-growth has steadily decreased over the past four decades, driven not only by falling rates of entrepreneurship but also languishing growth among existing firms. Second, this decline is particularly pronounced among young and small firms, while the share of high-growth ...
Journal Article
Business Dynamism and City Size
Business dynamism has been decreasing since the 1980s, but less so for larger cities.
Journal Article
Local Origins of Business Formation
Using comprehensive administrative data on business applications, we find that startups per capita exhibit enormous variation across counties and tracts in the United States. We decompose this spatial variation into two components: variation in business ideas per capita and in their rate of transition to startups. Both components matter for the variation in startups per capita. Furthermore, local demographic, economic, financial, and business conditions account for a significant fraction of the variation in startups per capita and in its components. In particular, income, education, age, and ...
Newsletter
Small Business Employment in the Pandemic Era and Beyond
In this article, we study the creation of small firms, with a focus on the post-March 2020 period (i.e., after the start of the global Covid-19 pandemic).1 We document the increase in new small firms, as well as the contributions of small firms to employment growth, during this period. Our analysis shows that, despite the increase in the number of small businesses, the share of employees working for small firms is considerably lower than in large businesses and is, in fact, declining.
Report
Income Inequality and Job Creation
We propose a novel channel through which rising income inequality affects job creation and macroeconomic outcomes. High-income households save relatively more in stocks and bonds but less in bank deposits. A rising top income share thereby increases the relative financing cost for bank-dependent firms, which in turn create fewer jobs. Exploiting variation in top income shares across US states and an instrumental variable strategy, we provide evidence for this channel. We then build a general equilibrium macro model with heterogeneous households and heterogeneous firms and calibrate it to our ...
Report
A unified approach to measuring u*
This paper bridges the gap between two popular approaches to estimating the natural rate of unemployment, u*. The first approach uses detailed labor market indicators, such as labor market flows, cross-sectional data on unemployment and vacancies, or various measures of demographic changes. The second approach, which employs reduced-form models and DSGE models, relies on aggregate price and wage Phillips curve relationships. We combine the key features of these two approaches to estimate the natural rate of unemployment in the United States using both data on labor market flows and a ...
Working Paper
COVID-19 and SMEs: A 2021 "Time Bomb"?
This paper assesses the prospects of a 2021 time bomb in small and medium-sized enterprises (SME) failures triggered by the generous support policies enacted during the 2020 COVID-19 crisis. Policies implemented in 2020, on their own, do not create a 2021 time bomb for SMEs. Rather, business failures and policy costs remain modest. By contrast, credit contraction poses significant risk. Such a contraction would disproportionately affect firms that could have survived COVID-19 in 2020 without any fiscal support. Even in that scenario, most business failures would not arise from excessively ...