The "Great Reshuffling" and Entrepreneurship

Abstract

The recent pandemic induced a large reallocation in labor markets that coincided with a surge in entrepreneurial entry. Using the universe of U.S. administrative tax records, we study how the "Great Reshuffling" reshaped transitions into entrepreneurship, entrant characteristics, and subsequent individual and firm outcomes. We document a persistent increase in entry, with larger gains among women with children. These entrants experience higher average income but greater income volatility. Firms founded during this period exhibit higher survival and profitability though are less likely to employ workers. Our evidence points to a persistent reallocation toward smaller, owner-operated businesses rather than short-lived experimentation.

Keywords: Entrepreneurship, Firm Dynamics, Income Risk, Labor Market Reallocation, Female Labor Supply, Flexibility