What's Holding Back Business Formation?

Patrick Kiernan and Huiyu Li

FRBSF Economic Letter, 2017

Abstract: The pace of business start-ups in the United States has declined over the past few decades. Economic theory suggests that business creation depends on the available workforce, and data analysis supports this strong link. By contrast, the relationship between start-ups and labor productivity is less well-defined, in part because entrepreneurs face initial costs that rise with productivity, specifically their own lost income from alternative employment. Overall, policies that incorporate improving labor availability may help to boost new business growth.

Date: 2017
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