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Business Formation: A Tale of Two Recessions

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Abstract

The trajectory of new business applications and transitions to employer businesses differ markedly during the Great Recession and the COVID-19 recession. Both applications and transitions to employer startups decreased slowly but persistently in the post-Lehman crisis period of the Great Recession. In contrast, during the COVID-19 recession new applications initially declined but have since sharply rebounded, resulting in a surge in applications during 2020. Projected transitions to employer businesses also rise, but this projection is dampened by a change in the composition of applications in 2020 toward applications that are more likely to be nonemployers.

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  • Emin M. Dinlersoz & Timothy Dunne & John Haltiwanger & Veronika Penciakova, 2021. "Business Formation: A Tale of Two Recessions," FRB Atlanta Working Paper 2021-5, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:90075
    DOI: 10.29338/wp2021-05
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    1. 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.
    2. Kimberly Bayard & Emin Dinlersoz & Timothy Dunne & John Haltiwanger & Javier Miranda & John Stevens, 2018. "Early-Stage Business Formation: An Analysis of Applications for Employer Identification Numbers," Working Papers 18-52, Center for Economic Studies, U.S. Census Bureau.
    3. 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.
    4. 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.
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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. Crane, Leland D. & Decker, Ryan A. & Flaaen, Aaron & Hamins-Puertolas, Adrian & Kurz, Christopher, 2022. "Business exit during the COVID-19 pandemic: Non-traditional measures in historical context," Journal of Macroeconomics, Elsevier, vol. 72(C).
    3. John C. Haltiwanger, 2022. "Entrepreneurship during the COVID-19 Pandemic: Evidence from the Business Formation Statistics," Entrepreneurship and Innovation Policy and the Economy, University of Chicago Press, vol. 1(1), pages 9-42.
    4. Richard Beem & Christopher Goetz & Martha Stinson & Sean Wang, 2022. "Business Dynamics Statistics for Single-Unit Firms," Working Papers 22-57, Center for Economic Studies, U.S. Census Bureau.
    5. 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.
    6. 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.
    7. Francisco J. Buera & Roberto N. Fattal-Jaef & Hugo Hopenhayn & P. Andres Neumeyer & Yongseok Shin, 2021. "The Economic Ripple Effects of COVID-19," NBER Working Papers 28704, National Bureau of Economic Research, Inc.
    8. 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).
    9. John Haltiwanger, 2022. "Entrepreneurship in the twenty-first century," Small Business Economics, Springer, vol. 58(1), pages 27-40, January.
    10. 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.
    11. Lynda Sanderson, 2024. "Born in bad times: Economic conditions, selection and employment," Working Papers 2024/01, New Zealand Productivity Commission.
    12. 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

    Keywords

    COVID-19; business failures; liquidity; small business;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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