Publication Date: January 5, 2021
Business formation is a critical component of local and national economic growth. The creation of new jobs and establishments from newly minted firms helps ensure the vitality of entrepreneurial activity in the United States. However, Pugsley and Sahin (2019) document a prominent and problematic 30-year decline in new employer business startups, something closely linked with "jobless recoveries." This is especially concerning given that nearly 20 percent of entrepreneurship stems out of necessity, as opposed to opportunity, during cyclical downturns (Fairlie and Fossen, 2019). The extent to which new firms are able to begin operating as innovative vessels during depressed economic times directly influences the pace at which the national economy can recover to pre-recession levels.