EU start-up calculator: impact of COVID-19 on aggregate employment: Scenario analysis for Austria, Belgium, Germany, Hungary, Italy and Spain

Cristiana Benedetti Fasil (), Petr Sedlacek and Vincent Sterk ()
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Cristiana Benedetti Fasil: European Commission – JRC, https://joint-research-centre.ec.europa.eu/index_en
Vincent Sterk: University College London, UK, CFM-UCL & CEPR

No JRC121715, JRC Research Reports from Joint Research Centre

Abstract: Early data show that the COVID-19 pandemic has affected particularly strongly start-up activity. This may have dramatic and lasting effects on aggregate employment which persist as the cohort of new firms age. To assess the impact, we developed the EU start-up calculator. This is an empirical tool that allows to conduct scenario analysis to compute the impact that the disruption of start-up activity has on aggregate employment on EU Member States and their economic sectors. In particular, we simulate a strong (i.e. of magnitude equivalent to the Great Recession) but short-lived (i.e. lasting one-year) crisis in Austria, Belgium, Germany, Hungary, Italy and Spain. This shock generates important and persistent job losses in all the countries that range between 0.7 (Belgium) to 2.2% (Austria) in 2020 and adds to a cumulative employment loss for the period 2020-2030 that ranges between 82 thousand (Belgium) to 1186 thousand (Italy). The negative impact is particularly high in Austria, Hungary, Italy and Spain, as well as in the service sector, which are characterized by a high firm turnover and that rely on start-ups and young firms for job creation. We also find that in most countries the deterioration of the survival rate of young firms plays an important role in driving employment, seconded by the number of new entrants. As a consequence, policies aimed at supporting young firms and incentivizing the creation of new ones may significantly mitigate the medium-term effect of the pandemic. In fact, when we simulate bounce-back scenarios where the number of firms entering the economy rapidly increases in 2021, in every country the outlook is significantly improved, the recovery is faster and the aggregate job loss is lower.

Keywords: COVID-19; start-ups; employment (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-ent and nep-isf
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