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Turbulence in startups: Effect of COVID-19 lockdown on creation of new firms and its capital

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  • Camino-Mogro, Segundo

Abstract

Business creation is an important measure of real economic activity because it shows the dynamics with which new firms are born, create jobs, move their capital, innovate and compete with old firms. In this sense, this paper analyzes the impact of the lockdown policies implemented to stop the spread of the COVID-19 on the creation of new formal firms in Ecuador. I use a regression discontinuity in time (RDiT) design jointly with official administrative real-time data, and find an overall large decrease in the creation of new formal firms (-73%) but also in the total amount of capital coming from the new formal firms (-40%). Additionally, my results suggest that the negative impacts of the COVID-19 lockdown on creation of new formal firms do not diminish over the time, in particular after one month and a half. Finally, I show that the March 16 lockdown measures help to explain only the observed changes in creation of new formal firms occurred the day after their announcement and not other changes that predate or follow these announcements. The main conclusion is that lockdown policies have a negative impact on firm creation, result that is of high policy relevance which can be a tool to design business attraction policies.

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  • Camino-Mogro, Segundo, 2020. "Turbulence in startups: Effect of COVID-19 lockdown on creation of new firms and its capital," MPRA Paper 104502, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:104502
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    1. Terstriep, Judith & David, Alexandra & Ruthemeier, Alexander & Elo, Maria, 2022. "The role of local embeddedness of transnational migrant start-ups in the COVID-19 crises: Examples from the Berlin start-up ecosystem," IAT Discussion Papers 22/05, Institut Arbeit und Technik (IAT), Westfälische Hochschule, University of Applied Sciences.
    2. Koppa, Vijetha & West, Jeremy, 2022. "School reopenings, COVID-19, and employment," Economics Letters, Elsevier, vol. 212(C).
    3. Brault, Julien, 2023. "Recent trends in EU corporate demography and policy: COVID and beyond," EIF Working Paper Series 2023/90, European Investment Fund (EIF).

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    More about this item

    Keywords

    COVID-19; Lockdown; New firms; Regression Discontinuity; Ecuador;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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