A Tale of Two Startups: The Loss and Gain of Startups in the U.S. Economy in the Pandemic

Robert W. Fairlie (), Frank M. Fossen () and Ke Lyu
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Robert W. Fairlie: University of California, Los Angeles
Frank M. Fossen: University of Nevada, Reno
Ke Lyu: Nevada State University

No 18160, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The COVID-19 pandemic delivered an unprecedented shock to business entry, with sharply contrasting effects on different types of startups. Using newly constructed administrative data from the Comprehensive Startup Panel covering the universe of U.S. startups, we provide the first official numbers of the pandemic’s impact on employer and nonemployer startup dynamics. Nonemployer startup formation declined substantially in 2020, while employer startups unexpectedly increased. Survival outcomes also diverged: nonemployer startup survival dropped markedly, whereas employer startup survival remained largely stable. These findings reveal a pronounced compositional shift and underscore the importance of designing policies tailored to nonemployer startups in economic crises.

Keywords: survival; pandemic; COVID-19; nonemployers; employers; startups; entrepreneurship; resilience (search for similar items in EconPapers)
JEL-codes: E32 L26 M13 (search for similar items in EconPapers)
Date: 2025-10
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