IDEAS home Printed from https://ideas.repec.org/a/aea/jecper/v28y2014i3p3-24.html
   My bibliography  Save this article

The Role of Entrepreneurship in US Job Creation and Economic Dynamism

Author

Listed:
  • Ryan Decker
  • John Haltiwanger
  • Ron Jarmin
  • Javier Miranda

Abstract

An optimal pace of business dynamics—encompassing the processes of entry, exit, expansion, and contraction—would balance the benefits of productivity and economic growth against the costs to firms and workers associated with reallocation of productive resources. It is difficult to prescribe what the optimal pace should be, but evidence accumulating from multiple datasets and methodologies suggests that the rate of business startups and the pace of employment dynamism in the US economy has fallen over recent decades and that this downward trend accelerated after 2000. A critical factor in accounting for the decline in business dynamics is a lower rate of business startups and the related decreasing role of dynamic young businesses in the economy. For example, the share of US employment accounted for by young firms has declined by almost 30 percent over the last 30 years. These trends suggest that incentives for entrepreneurs to start new firms in the United States have diminished over time. We do not identify all the factors underlying these trends in this paper but offer some clues based on the empirical patterns for specific sectors and geographic regions.

Suggested Citation

  • Ryan Decker & John Haltiwanger & Ron Jarmin & Javier Miranda, 2014. "The Role of Entrepreneurship in US Job Creation and Economic Dynamism," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 3-24, Summer.
    • Handle: RePEc:aea:jecper:v:28:y:2014:i:3:p:3-24
    Note: DOI: 10.1257/jep.28.3.3
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.28.3.3
    Download Restriction: no
    File URL: http://www.aeaweb.org/jep/app/2803/28030003_app.pdf
    Download Restriction: no
    File URL: http://www.aeaweb.org/jep/data/2803/28030003_data.zip
    Download Restriction: no
    File URL: http://www.aeaweb.org/jep/ds/2803/28030003_ds.zip
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    References listed on IDEAS

    as
    1. Lucia Foster & Cheryl Grim & John Haltiwanger, 2016. "Reallocation in the Great Recession: Cleansing or Not?," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 293-331.
    2. Steven J. Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2007. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," NBER Chapters, in: NBER Macroeconomics Annual 2006, Volume 21, pages 107-180, National Bureau of Economic Research, Inc.
    3. Eslava, Marcela & Haltiwanger, John C. & Kugler, Adriana & Kugler, Maurice, 2009. "Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia," IZA Discussion Papers 4256, Institute of Labor Economics (IZA).
    4. Chad Syverson, 2004. "Product Substitutability and Productivity Dispersion," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 534-550, May.
    5. Eslava, Marcela & Haltiwanger, John & Kugler, Adriana & Kugler, Maurice, 2004. "The effects of structural reforms on productivity and profitability enhancing reallocation: evidence from Colombia," Journal of Development Economics, Elsevier, vol. 75(2), pages 333-371, December.
    6. Randy A. Becker & John Haltiwanger & Ron S. Jarmin & Shawn D. Klimek & Daniel J. Wilson, 2006. "Micro and Macro Data Integration: The Case of Capital," NBER Chapters, in: A New Architecture for the US National Accounts, pages 541-610, National Bureau of Economic Research, Inc.
    7. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    8. Eslava, Marcela & Haltiwanger, John & Kugler, Adriana & Kugler, Maurice, 2004. "The effects of structural reforms on productivity and profitabality enhancing reallocation: evidence from Colombia," Discussion Paper Series In Economics And Econometrics 0408, Economics Division, School of Social Sciences, University of Southampton.
    9. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Enghin Atalay, 2014. "Materials Prices And Productivity," Journal of the European Economic Association, European Economic Association, vol. 12(3), pages 575-611, June.
    2. Ryan A. Decker & John C. Haltiwanger & Ron S. Jarmin & Javier Miranda, 2018. "Changing Business Dynamism and Productivity: Shocks vs. Responsiveness," NBER Working Papers 24236, National Bureau of Economic Research, Inc.
    3. John Haltiwanger & Ron S. Jarmin & Robert Kulick & Javier Miranda, 2016. "High Growth Young Firms: Contribution to Job, Output, and Productivity Growth," NBER Chapters, in: Measuring Entrepreneurial Businesses: Current Knowledge and Challenges, pages 11-62, National Bureau of Economic Research, Inc.
    4. Lucia Foster & Cheryl Grim & John Haltiwanger, 2016. "Reallocation in the Great Recession: Cleansing or Not?," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 293-331.
    5. Teresa C Fort & John Haltiwanger & Ron S Jarmin & Javier Miranda, 2013. "How Firms Respond to Business Cycles: The Role of Firm Age and Firm Size," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(3), pages 520-559, August.
    6. Kaus, Wolfhard & Slavtchev, Viktor & Zimmermann, Markus, 2020. "Intangible capital and productivity: Firm-level evidence from German manufacturing," IWH Discussion Papers 1/2020, Halle Institute for Economic Research (IWH).
    7. Decker, Ryan A. & Haltiwanger, John & Jarmin, Ron S. & Miranda, Javier, 2016. "Where has all the skewness gone? The decline in high-growth (young) firms in the U.S," European Economic Review, Elsevier, vol. 86(C), pages 4-23.
    8. Maloney, William F. & Sarrias, Mauricio, 2017. "Convergence to the managerial frontier," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 284-306.
    9. Izak Atiyas, 2011. "Firm Level Data in The ERF Region: Research Questions, Data Requirements and Possibilities," Working Papers 589, Economic Research Forum, revised 06 Jan 2011.
    10. Arnold, Jens & Scarpetta, Stefano & Nicoletti, Giuseppe, 2011. "Regulation, resource reallocation and productivity growth," EIB Papers 4/2011, European Investment Bank, Economics Department.
    11. Strauss, Hubert, 2011. "Productivity and growth in Europe: Editor's introduction," EIB Papers 1/2011, European Investment Bank, Economics Department.
    12. Haltiwanger, John, 2011. "Firm dynamics and productivity growth," EIB Papers 5/2011, European Investment Bank, Economics Department.
    13. Altomonte, Carlo & Ottaviano, Gianmarco, 2011. "The role of international production sharing in EU productivity and competitiveness," EIB Papers 3/2011, European Investment Bank, Economics Department.
    14. J. David Brown & Emin Dinlersoz & John S. Earle, 2022. "Productivity Dispersion, Misallocation, and Reallocation Frictions: Theory and Evidence from Policy Reforms," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(1), pages 1-43, March.
    15. J. David Brown & John Earle, 2011. "Nature Versus Nurture in the Origins of Highly Productive Businesses: An Exploratory Analysis of U.S. Manufacturing Establishments," Working Papers 11-26, Center for Economic Studies, U.S. Census Bureau.
    16. Uppenberg, Kristian, 2011. "Economic growth in the US and the EU: a sectoral decomposition," EIB Papers 2/2011, European Investment Bank, Economics Department.
    17. Duverger, Catherine & van Pottelsberghe de la Potterie, Bruno, 2011. "Determinants of productivity growth: Science and technology policies and the contribution of R&D," EIB Papers 9/2011, European Investment Bank, Economics Department.
    18. J. David Brown & Emin Dinlersoz & John S. Earle, 2016. "Does Higher Productivity Dispersion Imply Greater Misallocation?A Theoretical and Empirical Analysis," Working Papers 16-42, Center for Economic Studies, U.S. Census Bureau.
    19. Andrea Lasagni & Annamaria Nifo & Gaetano Vecchione, 2015. "Firm Productivity And Institutional Quality: Evidence From Italian Industry," Journal of Regional Science, Wiley Blackwell, vol. 55(5), pages 774-800, November.
    20. Ghulam, Yaseen, 2021. "Institutions and firms’ technological changes and productivity growth," Technological Forecasting and Social Change, Elsevier, vol. 171(C).

    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:28:y:2014:i:3:p:3-24. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.