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Demographic Change and Business Dynamics in the EU

Author

Listed:
  • Igor Fedotenkov
  • Anneleen Vandeplas

Abstract

Populations across the European Union are ageing. While concerns have been raised that ageing may reduce business dynamism, and, consequently, economic growth, this hypothesis has not yet been tested empirically in an EU context. To address this gap, this paper investigates the relationship between demographic structure and firm entry rates in the European Union. The results suggest that the size of the 30-44 age group has the strongest positive effect on firm entry. Alternative estimation methods and the inclusion of control variables do not change this conclusion. It is in line with the notion that age has a hump-shaped effect on the propensity to engage in entrepreneurship. In addition, younger age cohorts are found to exert a more negative impact on firm entry than older age cohorts. Rising educational attainment may partially offset the adverse effects of demographic ageing on business dynamism in the years ahead

Suggested Citation

  • Igor Fedotenkov & Anneleen Vandeplas, 2026. "Demographic Change and Business Dynamics in the EU," European Economy - Discussion Papers 251, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:dispap:251
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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