Simeon Djankov, Eva (Yiwen) Zhang, 03 March 2021

Steep falls in entrepreneurial activity were recorded in early 2020 across G7 economies. In the US, however, the creation of US startups shot up by 24% relative to the previous year. This column uses data on new company applications in the US since 2004 to show that firm birth generally accelerates in the aftermath of economic crises and that this pattern was particularly pronounced in 2020, fuelled by the government assistance provided to small businesses. It also shows that US firm births are estimated to have surpassed firm deaths in 2020, unlike in the aftermath of the previous financial crisis.

Flavio Calvino, Chiara Criscuolo, Rudy Verlhac, 23 June 2020

Start-ups play a key role in OECD economies, but the COVID-19 crisis is reducing their creation, challenging their survival, and limiting their growth. Business registrations have been dropping significantly in recent months and a missing generation of new firms has significant implications for economic outcomes, notably employment. This column argues that these can be mitigated by taking steps to support existing start-ups and the creation of new firms. Policymakers should tackle short-term challenges, supporting short-term liquidity and availability of funding, but also and importantly foster the ability of start-ups to grasp new business opportunities. Policies that reduce barriers to entrepreneurship, provide incentives for start-ups, and boost entrepreneurial potential could help speed up the recovery and preserve aggregate employment in the long term.

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