Join getAbstract to access the summary!

What’s Holding Back Business Formation?

Join getAbstract to access the summary!

What’s Holding Back Business Formation?

FRBSF,

5 min read
5 take-aways
Audio & text

What's inside?

Growth in US entrepreneurial start-ups has slumped since the 1980s.

auto-generated audio
auto-generated audio

Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • Eye Opening

Recommendation

The long-term health of the American economy may be at risk, as the rate of new businesses created has been considerably slower in the United States than its historical norms. This fact might be a piece of the puzzle explaining sluggish GDP growth since before the Great Recession. Researcher Patrick Kiernan and economist Huiyu Li examine the root inputs of business formation and conclude that policy makers could provide opportunities to engage more robust entrepreneurial energy. getAbstract recommends this compelling report to entrepreneurs, venture capitalists and policy experts.

Summary

To understand why the number of new businesses created per year in the United States has dropped since the late 1980s, economists explore two forces that encourage start-ups: the size and productivity of the workforce. According to the “life cycle of businesses” theory, a larger labor pool logically translates to a higher level of business formation, because more consumers with jobs generate greater demand for products and services, and so more businesses enter the marketplace.

The impact of productivity, however, is not as obvious. Rising productivity can lead...

About the Authors

Patrick Kiernan and Huiyu Li are economists at the Federal Reserve Bank of San Francisco.


Comment on this summary