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Business creation during COVID-19

Author

Listed:
  • Saleem Bahaj
  • Sophie Piton
  • Anthony Savagar

Abstract

Using UK data, we present greater empirical detail on the puzzling firm dynamics that emerged during coronavirus disease 2019 (COVID-19). We show that firm entry increased during the pandemic across several countries, and this contrasts with typical recessions where firm entry declines. Additionally, the rise in firm entry is driven by individual entrepreneurs creating companies for the first time, particularly in online retail. We find evidence that firm creation responded significantly to declines in retail footfall and that firms created during the pandemic are more likely to exit and less likely to post jobs. Overall, this implies that despite surging firm creation during the pandemic, the overall employment effect is limited. Finally, we find that the primary contributor to limited employment creation is the shift in ownership composition of new entrants during COVID.

Suggested Citation

  • Saleem Bahaj & Sophie Piton & Anthony Savagar, 2024. "Business creation during COVID-19," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 39(119), pages 611-648.
    • Handle: RePEc:oup:ecpoli:v:39:y:2024:i:119:p:611-648.
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    File URL: http://hdl.handle.net/10.1093/epolic/eiae008
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    Cited by:

    1. Daniel E. Rigobon & Thibaut Duprey & Artur Kotlicki & Philip Schnattinger & Soheil Baharian & Thomas R. Hurd, 2022. "Business Closures and (Re)Openings in Real-Time Using Google Places: Proof of Concept," JRFM, MDPI, vol. 15(4), pages 1-10, April.
    2. Yoojin Shin & Boram Choi, 2025. "The Changes in the Economic Environment and Corporate Information Asymmetry—Focusing on the COVID-19 Pandemic," Sustainability, MDPI, vol. 17(9), pages 1-17, April.
    3. David Van Dijcke & Marcus Buckmann & Arthur Turrell & Tomas Key, 2023. "Vacancy posting, firm balance sheets, and pandemic policy," Bank of England working papers 1033, Bank of England.
    4. Ascari, Guido & Colciago, Andrea & Silvestrini, Riccardo, 2023. "Business dynamism, sectoral reallocation and productivity in a pandemic," European Economic Review, Elsevier, vol. 156(C).

    More about this item

    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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