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Start-up types and macroeconomic performance in Europe

Ralph De Haas (), Vincent Sterk () and Neeltje Van Horen ()
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Vincent Sterk: University College London and CEPR

No 986, Bank of England working papers from Bank of England

Abstract: Can policymakers improve macroeconomic performance by encouraging the entry of high‑performance start‑ups? To answer this question, we construct a novel and comprehensive data set on 1.3 million start‑ups in 10 European countries. We apply cluster analysis to identify distinct start‑up types and trace their development over time. Three stylised facts transpire. First, we uncover five well‑separated start‑up types that are consistently present across countries, industries, and cohorts. We label these basic, large, capital‑intensive, cash‑intensive, and high‑leverage. Second, the initial differences between these start‑up types are persistent. Third, each start‑up type displays a characteristic life cycle in terms of productivity, employment generation, and exit rates. We feed these empirical results into an agnostic firm dynamics model to quantify how much structural policy could improve macroeconomic performance by shifting the composition of start‑ups. We find that substantial gains in aggregate employment and productivity can be made through policies that benefit high‑performance start‑ups (such as large and capital‑intensive ones) while discouraging the entry of underperforming firms (such as highly leveraged ones).

Keywords: Start‑ups; firm entry; productivity; corporate tax; entrepreneurship; cluster analysis. (search for similar items in EconPapers)
JEL-codes: D22 D24 G32 L11 L25 L26 O47 (search for similar items in EconPapers)
Pages: 75 pages
Date: 2022-06-17
New Economics Papers: this item is included in nep-bec, nep-eec, nep-eff, nep-ent, nep-ino, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0986

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