Demographic origins of the start-up deficit
By: Karahan, Fatih Pugsley, Benjamin and Şahin, Ayşegül
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Material type: 
BookPublisher: The American Economic Review Description: 114(7), Jul, 2024: p.1986-2023.Subject(s): Economics, Start-Up Rate Decline, Labor Supply Growth, Demographics, Firm Dynamics, Incumbent Survival, Business Life Cycle, Cross-State Variation, Entry Rate Series, Historical Establishment Data, Entrepreneurship, U.S. Economy
In:
The American Economic ReviewSummary: This paper proposes a simple explanation for the long-run decline in the U.S. start-up rate, attributing it to a slowdown in labor supply growth since the late 1970s, largely predetermined by demographic trends. The mechanism accounts for roughly half of the decline and explains why incumbent firm survival and average growth over the life cycle have remained relatively stable. Using a standard model of firm dynamics and cross-state variation in labor supply growth, the study tests and confirms this demographic channel. Additionally, a longer entry rate series imputed from historical establishment tabulations shows a rise during the 1960s–1970s period of accelerating labor force growth, reinforcing the demographic explanation for entrepreneurial decline. Authors propose a simple explanation for the long-run decline in the US start-up rate. It originates from a slowdown in labor supply growth since the late 1970s, largely predetermined by demographics. This channel can explain roughly half of the decline and why incumbent firm survival and average growth over the life cycle have changed little. We show these results in a standard model of firm dynamics and test the mechanism using cross-state variation in labor supply growth. Finally, we show that a longer entry rate series imputed using historical establishment tabulations rises over the 1960s–1970s period of accelerating labor force growth.- Reproduced
https://www.aeaweb.org/articles?id=10.1257/aer.20210362
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 114(7), Jul, 2024: p.1986-2023 | Available | AR133271 |
This paper proposes a simple explanation for the long-run decline in the U.S. start-up rate, attributing it to a slowdown in labor supply growth since the late 1970s, largely predetermined by demographic trends. The mechanism accounts for roughly half of the decline and explains why incumbent firm survival and average growth over the life cycle have remained relatively stable. Using a standard model of firm dynamics and cross-state variation in labor supply growth, the study tests and confirms this demographic channel. Additionally, a longer entry rate series imputed from historical establishment tabulations shows a rise during the 1960s–1970s period of accelerating labor force growth, reinforcing the demographic explanation for entrepreneurial decline. Authors propose a simple explanation for the long-run decline in the US start-up rate. It originates from a slowdown in labor supply growth since the late 1970s, largely predetermined by demographics. This channel can explain roughly half of the decline and why incumbent firm survival and average growth over the life cycle have changed little. We show these results in a standard model of firm dynamics and test the mechanism using cross-state variation in labor supply growth. Finally, we show that a longer entry rate series imputed using historical establishment tabulations rises over the 1960s–1970s period of accelerating labor force growth.- Reproduced
https://www.aeaweb.org/articles?id=10.1257/aer.20210362
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