Demographic Origins of the Startup Deficit

Download File
WP-Demographic Origins of the Startup Deficit-Karahan, Pugsley, and Sahin

Fatih Karahan, Federal Reserve Bank of New York
Benjamin Pugsley, University of Notre Dame
Aysegül Sahin, University of Texas Austin, NBER


We propose a simple explanation for the long-run decline in the startup rate. It was caused by a slowdown in labor supply growth since the late 1970s, largely pre-determined by demographics. This channel explains roughly two-thirds of the decline and why incumbent firm survival and average growth over the lifecycle have been little changed. We show these results in a standard model of firm dynamics and test the mechanism using shocks to labor supply growth across states. Finally, we show that a longer startup rate series imputed using historical establishment tabulations rises over the 1960-70s period of accelerating labor force growth.

June 4, 2019


Fatih Karahan Benjamin Pugsley Aysegül Sahin


Taxes, Inequality & Growth


Connect with us!

Explore the Equitable Growth network of experts around the country and get answers to today's most pressing questions!

Get in Touch