Demographic Origins of the Startup Deficit

By Fatih Karahan, Benjamin W. Pugsley, Aysegul Sahin. Social Science Research Network, 2019

118 citations recorded by the source corpus.

We 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. (JEL D22, D25, E24, J11, J22, J23, M11)

Subfields: Accounting, Economics and Econometrics, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/ba8a548f16fba9d855eafa136a7809cf7672a41d

Citations in the corpus

• The Nature of Firm Growth (2017, unknown): “See also Karahan, Pugsley, and Şahin (2019) who show the importance of compositional change for the aggregate exit rate.”
• Changing Business Dynamism and Productivity: Shocks versus Responsiveness (2020, unknown): “(2014) and Karahan, Pugsley, and Sahin (2018).”