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A Tale of Two Startups: The Loss and Gain of Startups in the U.S. Economy in the Pandemic

Author

Listed:
  • Fairlie, Robert W.

    (University of California, Los Angeles)

  • Fossen, Frank M.

    (University of Nevada, Reno)

  • Lyu, Ke

    (Nevada State University)

Abstract

The COVID-19 pandemic delivered an unprecedented shock to business entry, with sharply contrasting effects on different types of startups. Using newly constructed administrative data from the Comprehensive Startup Panel covering the universe of U.S. startups, we provide the first official numbers of the pandemic’s impact on employer and nonemployer startup dynamics. Nonemployer startup formation declined substantially in 2020, while employer startups unexpectedly increased. Survival outcomes also diverged: nonemployer startup survival dropped markedly, whereas employer startup survival remained largely stable. These findings reveal a pronounced compositional shift and underscore the importance of designing policies tailored to nonemployer startups in economic crises.

Suggested Citation

  • Fairlie, Robert W. & Fossen, Frank M. & Lyu, Ke, 2025. "A Tale of Two Startups: The Loss and Gain of Startups in the U.S. Economy in the Pandemic," IZA Discussion Papers 18160, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp18160
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    Keywords

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    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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