Demographic Origins of the Startup Deficit

46 Pages Posted: 28 May 2019

See all articles by Fatih Karahan

Fatih Karahan

Federal Reserve Bank of New York

Benjamin W. Pugsley

University of Notre Dame - Department of Economics

Aysegul Sahin

University of Texas at Austin

Multiple version iconThere are 2 versions of this paper

Date Written: May 2019

Abstract

We propose a simple explanation for the long-run decline in the startup rate. It was caused by a slowdown in labor supply growth since the late 1970s, largely pre-determined by demographics. This channel explains roughly two-thirds of the decline and why incumbent firm survival and average growth over the lifecycle have been little changed. We show these results in a standard model of firm dynamics and test the mechanism using shocks to labor supply growth across states. Finally, we show that a longer startup rate series imputed using historical establishment tabulations rises over the 1960-70s period of accelerating labor force growth.

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Suggested Citation

Karahan, Fatih and Pugsley, Benjamin W. and Sahin, Aysegul, Demographic Origins of the Startup Deficit (May 2019). NBER Working Paper No. w25874, Available at SSRN: https://ssrn.com/abstract=3394655

Fatih Karahan (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Benjamin W. Pugsley

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

Aysegul Sahin

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

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