Flight to Safety: How Economic Downturns Affect Talent Flows to Startups

65 Pages Posted: 7 Oct 2020 Last revised: 3 Apr 2022

See all articles by Shai Bernstein

Shai Bernstein

Harvard Business School

Richard Townsend

University of California, San Diego (UCSD) - Rady School of Management

Ting Xu

University of Virginia - Darden School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 2020

Abstract

Using proprietary data from AngelList Talent, we study how individuals’ job search and application behavior changed during the COVID downturn. We find that job seekers shifted their searches toward more established firms and away from early-stage startups, even within the same individual over time. Simultaneously, they broadened their other search parameters. Relative to more established firms, early-stage startups experienced a decline in applications, primarily driven by higher quality candidates. These declines hold within a firm or job posting over time. Our findings uncover a flight to safety channel in the labor market, which may amplify the pro-cyclical nature of entrepreneurial activities.

Suggested Citation

Bernstein, Shai and Townsend, Richard and Xu, Ting, Flight to Safety: How Economic Downturns Affect Talent Flows to Startups (October 2020). NBER Working Paper No. w27907, Available at SSRN: https://ssrn.com/abstract=3705117

Shai Bernstein (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

Richard Townsend

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Ting Xu

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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