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Entrepreneurship during the COVID-19 Pandemic: Evidence from the Business Formation Statistics

In: Entrepreneurship and Innovation Policy and the Economy, volume 1

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  • John C. Haltiwanger

Abstract

Applications for new businesses from the U.S. Census Bureau’s monthly and weekly Business Formation Statistics (BFS) fell substantially in the early stages of the pandemic but then surged in the second half of 2020. This surge has continued through May 2021. The pace of applications since mid-2020 is the highest on record (earliest data available is 2004). The large increase in applications is for both likely new employers and nonemployers. These patterns contrast sharply with those in the Great Recession when applications for likely new employer businesses and in turn actual startups of employer businesses declined sharply and persistently. The surge in new business applications has been uneven across sectors. Ten 3-digit NAICS industries account for 75% of the surge. Dominant industries include Nonstore Retail (alone accounting for 33% of the surge), Professional, Scientific and Technical Services, Truck Transportation, and Accommodation and Food Services. Given that existing small businesses in Retail Trade and Accommodation and Food Services have suffered especially large declines in the pandemic, these patterns are consistent with restructuring induced by the pandemic.
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Suggested Citation

  • John C. Haltiwanger, 2021. "Entrepreneurship during the COVID-19 Pandemic: Evidence from the Business Formation Statistics," NBER Chapters, in: Entrepreneurship and Innovation Policy and the Economy, volume 1, pages 9-42, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:14575
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    References listed on IDEAS

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    1. Kimberly Bayard & Emin M. Dinlersoz & Timothy Dunne & John Haltiwanger & Javier Miranda & John J. Stevens, 2018. "Early-Stage Business Formation : An Analysis of Applications for Employer Identification Numbers," Finance and Economics Discussion Series 2018-015, Board of Governors of the Federal Reserve System (U.S.).
    2. Ryan A. Decker & John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2020. "Changing Business Dynamism and Productivity: Shocks versus Responsiveness," American Economic Review, American Economic Association, vol. 110(12), pages 3952-3990, December.
    3. Fairlie, Robert, 2020. "The Impact of COVID-19 on Small Business Owners: The First Three Months after Social-Distancing Restrictions," MPRA Paper 113127, University Library of Munich, Germany.
    4. Catherine E. Fazio & Jorge Guzman & Yupeng Liu & Scott Stern, 2021. "How is COVID Changing the Geography of Entrepreneurship? Evidence from the Startup Cartography Project," NBER Working Papers 28787, National Bureau of Economic Research, Inc.
    5. Jorge Guzman & Scott Stern, 2020. "The State of American Entrepreneurship: New Estimates of the Quantity and Quality of Entrepreneurship for 32 US States, 1988–2014," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 212-243, November.
    6. Daron Acemoglu & Ufuk Akcigit & Harun Alp & Nicholas Bloom & William Kerr, 2018. "Innovation, Reallocation, and Growth," American Economic Review, American Economic Association, vol. 108(11), pages 3450-3491, November.
    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. Jose Asturias & Emin Dinlersoz & John Haltiwanger & Rebecca Hutchinson, 2021. "Business Applications as Economic Indicators," Working Papers 21-09, Center for Economic Studies, U.S. Census Bureau.
    9. Robert Fairlie, 2020. "The impact of COVID‐19 on small business owners: Evidence from the first three months after widespread social‐distancing restrictions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(4), pages 727-740, October.
    10. Emin Dinlersoz & Timothy Dunne & John Haltiwanger & Veronika Penciakova, 2021. "Business Formation: A Tale of Two Recessions," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 253-257, May.
    11. Steven J. Davis & John Haltiwanger & Ronald S. Jarmin & C.J. Krizan & Javier Miranda & Alfred Nucci & Kristin Sandusky, 2009. "Measuring the Dynamics of Young and Small Businesses: Integrating the Employer and Nonemployer Universes," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 329-366, National Bureau of Economic Research, Inc.
    12. Alon, Titan & Berger, David & Dent, Robert & Pugsley, Benjamin, 2018. "Older and slower: The startup deficit’s lasting effects on aggregate productivity growth," Journal of Monetary Economics, Elsevier, vol. 93(C), pages 68-85.
    13. Catherine Buffington & Daniel Chapman & Emin Dinlersoz & Lucia Foster & John Haltiwanger, 2021. "High Frequency Business Dynamics in the United States During the COVID-19 Pandemic," Working Papers 21-06, Center for Economic Studies, U.S. Census Bureau.
    14. Katharine G. Abraham & John C. Haltiwanger & Kristin Sandusky & James R. Spletzer, 2017. "Measuring the Gig Economy: Current Knowledge and Open Issues," NBER Chapters, in: Measuring and Accounting for Innovation in the Twenty-First Century, pages 257-298, National Bureau of Economic Research, Inc.
    15. Steven J. Davis & John C. Haltiwanger, 2019. "Dynamism Diminished: The Role of Housing Markets and Credit Conditions," NBER Working Papers 25466, National Bureau of Economic Research, Inc.
    16. Vincent Sterk & Petr Sedláček & Benjamin Pugsley, 2021. "The Nature of Firm Growth," American Economic Review, American Economic Association, vol. 111(2), pages 547-579, February.
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    19. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2013. "Who Creates Jobs? Small versus Large versus Young," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 347-361, May.
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    Cited by:

    1. Jose Asturias & Emin Dinlersoz & John Haltiwanger & Rebecca Hutchinson, 2021. "Business Applications as Economic Indicators," Working Papers 21-09, Center for Economic Studies, U.S. Census Bureau.
    2. Bellatin, Alejandra & Galassi, Gabriela, 2022. "What COVID-19 May Leave Behind: Technology-Related Job Postings in Canada," IZA Discussion Papers 15209, Institute of Labor Economics (IZA).
    3. Yue Dai, 2021. "A Behavioral Cultural-Based Development Analysis of Entrepreneurship in China," Administrative Sciences, MDPI, vol. 11(3), pages 1-16, September.
    4. Cirera,Xavier & Vargas Da Cruz,Marcio Jose & Grover,Arti Goswami & Iacovone,Leonardo & Medvedev,Denis & Pereira Lopez,Mariana De La Paz & Reyes,Santiago, 2021. "Firm Recovery during COVID-19 : Six Stylized Facts," Policy Research Working Paper Series 9810, The World Bank.
    5. Iman Cheratian & Saleh Goltabar & Mohammad Reza Farzanegan, 2022. "Survival Strategies under Sanctions: Firm-Level Evidence from Iran," CESifo Working Paper Series 9568, CESifo.
    6. Brault, Julien, 2023. "Recent trends in EU corporate demography and policy: COVID and beyond," EIF Working Paper Series 2023/90, European Investment Fund (EIF).
    7. Catherine E. Fazio & Jorge Guzman & Yupeng Liu & Scott Stern, 2021. "How is COVID Changing the Geography of Entrepreneurship? Evidence from the Startup Cartography Project," NBER Working Papers 28787, National Bureau of Economic Research, Inc.
    8. Catherine Buffington & Daniel Chapman & Emin Dinlersoz & Lucia Foster & John Haltiwanger, 2021. "High Frequency Business Dynamics in the United States During the COVID-19 Pandemic," Working Papers 21-06, Center for Economic Studies, U.S. Census Bureau.
    9. Shyngys Karimov & Jozef Konings, 2021. "How lockdown causes a missing generation of start-ups and jobs," International Economics and Economic Policy, Springer, vol. 18(3), pages 457-473, July.
    10. Thibaut Duprey & Daniel E. Rigobon & Philip Schnattinger & Artur Kotlicki & Soheil Baharian & T. R. Hurd, 2022. "Business Closures and (Re)Openings in Real Time Using Google Places," Staff Working Papers 22-1, Bank of Canada.
    11. Albert, Christoph & Caggese, Andrea & González, Beatriz & Martin-Sanchez, Victor, 2023. "Income inequality and entrepreneurship: Lessons from the 2020 COVID-19 recession," Journal of Banking & Finance, Elsevier, vol. 149(C).
    12. John Haltiwanger, 2022. "Entrepreneurship in the twenty-first century," Small Business Economics, Springer, vol. 58(1), pages 27-40, January.
    13. Florian Eckert & Heiner Mikosch, 2022. "Firm bankruptcies and start-up activity in Switzerland during the COVID-19 crisis," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-25, December.
    14. Cindy Cunningham & Sabrina Wulff Pabilonia & Jay Stewart & Lucia Foster & Cheryl Grim & John Haltiwanger & Zoltan Wolf, 2021. "Chaos Before Order: Productivity Patterns in U.S. Manufacturing," International Productivity Monitor, Centre for the Study of Living Standards, vol. 41, pages 138-152, Fall.
    15. Alejandra Bellatin & Gabriela Galassi, 2022. "What COVID-19 May Leave Behind: Technology-Related Job Postings in Canada," Staff Working Papers 22-17, Bank of Canada.
    16. Catherine Buffington & Daniel Chapman & Emin Dinlersoz & Lucia Foster & John Haltiwanger, 2021. "High-frequency data from the U.S. Census Bureau during the COVID-19 pandemic: small vs. new businesses," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 56(3), pages 155-167, July.

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    More about this item

    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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