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The economic contribution of start-up firms in Germany

Stefan Schneck and May-Strobl, Eva

No 02/14, Working Papers from Institut für Mittelstandsforschung (IfM) Bonn

Abstract: This paper utilizes German tax data to present evidence about the direct and indirect effects of new firm formation. Cohort analysis is applied to investigate survival, sales, inputs, and value added of start-up firms. Most drop-outs occur in the early years. We show that start-up microenterprises increase economic vitality directly. Turnover and value added are in an approximate proportion of 3:1. With respect to the indirect effects of new firms, we find that one Euro of sales induce considerable indirect effects because 66 Cents are used to buy products and services from incumbents. For this reason, new firms substantially promote economic prosperity of incumbents. Sectoral differences are also indicated, with the manufacturing industry generating highest sales and relying on most inputs in the early periods.

Keywords: entrepreneurship; direct effects; indirect effects; sales (search for similar items in EconPapers)
JEL-codes: L26 L29 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-eur and nep-sbm
Date: 2014
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