Demographic Origins of the Startup Deficit

46 Pages Posted: 28 May 2019 Last revised: 13 Mar 2023

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.

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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