Macroeconomics Seminar - Fatih Karahan (Federal Reserve Bank of New York)

Room 315, Level 3, FBE Building, 111 Barry Street, Carlton

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Yusuf Mercan

yusuf.mercan@unimelb.edu.au

T: +61 3 8344 0470

Title: Demographic Origins of the Startup Deficit

Abstract: 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 a longer startup rate series, imputed using historical establishment tabulations, that rises over the 1960-70s period of accelerating labor force growth.