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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 ...
Working Paper
The Impact of the Dodd-Frank Act on Small Business
There are concerns that the Dodd-Frank Act (DFA) has impeded small-business lending. By increasing the fixed regulatory compliance requirements needed to make business loans and operate a bank, the DFA disproportionately reduced the incentives for all banks to make very modest loans and reduced the viability of small banks, whose small-business share of commercial and industrial (C&I) loans is generally much higher than that of larger banks. Despite an economic recovery, the small-loan share of C&I loans at large banks and banks with $300 or more million in assets has fallen 9 percentage ...
Job Quits, New-Business Applications and the Postpandemic Pace of U.S. Business Formation
This analysis examines the relationship between job quits and new business applications since the emergence of COVID-19 and its implications for U.S. business formation.
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 ...
Journal Article
U.S. Business Applications Surge in the Face of COVID-19
Business formation in the United States has been on a decline for several decades. Most prior economic recessions have accelerated this trend. However, the recent economic downturn associated with COVID-19 appears to have had the opposite effect: business formation, as measured by business applications, has actually surged since late May.
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 ...
Briefing
Will the Pandemic Surge in Employer Business Formation Last?
Business applications — or applications for employer identification numbers (EINs) — surged at the beginning of the pandemic, more than doubling prepandemic levels of the early 2000s. While not every entrepreneur filing for an EIN is guaranteed to hire workers, this surge in business applications was followed by a strong increase in employer startups more than a year later, as establishment openings rose 45 percent. Interestingly, this rise in employer startups has remained elevated compared to prepandemic levels, although recent evidence indicates that this increase has been wearing ...