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Working Paper
Entrepreneurship and State Taxation
Entrepreneurship plays a vital role in the economy, yet there exists little well-identified research into the effects of taxes on startup activity. Using recently developed county-level data on startups, we examine the effect of states' corporate, personal and sales tax rates on new firm activity and test for cross-border spillovers in response to these policies. We find that new firm employment is negatively?and disproportionately?affected by corporate tax rates. We find little evidence of an effect of personal and sales taxes on entrepreneurial outcomes. Our results are robust to changes in ...
Working Paper
How Did Young Firms Fare During the Great Recession? Evidence from the Kauffman Firm Survey
We examine the evolution of several key firm economic and financial variables in the years surrounding and during the Great Recession using the Kauffman Firm Survey, a large panel of young firms founded in 2004 and surveyed for eight consecutive years. We find that these young firms experienced slower growth in revenues, employment, and assets and faced tighter financing conditions during the recessionary years. While we find some evidence that firm growth picked up following the recession, it is not clear that it returned to the levels it would have been absent the recessionary shock. We ...
Working Paper
Entrepreneurial tail risk: implications for employment dynamics
New businesses are important for job creation and have contributed more than proportionally to the expansion in the 1990s and the decline of employment after the 2007 recession. This paper provides a framework for analyzing determinants of business creation in a world where new business owners are exposed to idiosyncratic risk due to initial imperfect diversification. This paper uses this framework to analyze how entrepreneurial risk has changed over time and how this has affected employment in the US. Conditions are provided under which entrepreneurial risk can be identified using micro data ...
Working Paper
Reparations and Persistent Racial Wealth Gaps
Reparations is a policy proposal aiming to address the wealth gap between Black and White households. We provide a first formal analysis of the economics of reparations using a long-run model of heterogeneous dynasties with an occupational choice and bequests. Our innovation is to introduce endogenous dispersion of beliefs about risky returns, reflecting differences in dynasties' experiences with entrepreneurship over time. Feeding the exclusion of Black dynasties from labor and capital markets as driving force, the model quantitatively reproduces current and historical racial gaps in wealth, ...
Working Paper
Changing Business Dynamism and Productivity : Shocks vs. Responsiveness
The pace of job reallocation has declined in all U.S. sectors since 2000. In standard models, aggregate job reallocation depends on (a) the dispersion of idiosyncratic productivity shocks faced by businesses and (b) the marginal responsiveness of businesses to those shocks. Using several novel empirical facts from business microdata, we infer that the pervasive post-2000 decline in reallocation reflects weaker responsiveness in a manner consistent with rising adjustment frictions and not lower dispersion of shocks. The within-industry dispersion of TFP and output per worker has risen, while ...
Working Paper
Information Technology in Banking and Entrepreneurship
We study the importance of information technology (IT) in banking for entrepreneurship. Guided by a parsimonious model, we establish that job creation by young firms is stronger in US counties more exposed to banks with greater IT adoption. We present evidence consistent with banks' IT adoption spurring entrepreneurship through a collateral channel: entrepreneurship increases by more in IT-exposed counties when house prices rise. Further analysis suggests that IT improves banks' ability to determine collateral values, in particular when collateral appraisal is more complex. IT also reduces ...
Working Paper
Business Dynamics in the National Establishment Time Series (NETS)/Leland Crane, Ryan Decker
Business microdata have proven useful in a number of fields, but the main sources of comprehensive microdata are subject to significant confidentiality restrictions. A growing number of papers instead use a private data source seeking to cover the universe of U.S. business establishments, the National Establishment Time Series (NETS). Previous research documents the representativeness of NETS in terms of the distribution of employment and establishment counts across industry, geography, and establishment size. But there exists considerable need among researchers for microdata suitable for ...
Working Paper
High-Growth Firms in the United States: Key Trends and New Data Opportunities
Using administrative data from the U.S. Census Bureau, we introduce a new public-use database that tracks activities across firm growth distributions over time. With these new data, we uncover several key trends for high-growth firms---critical engines of innovation and economic growth. First, the share of firms that are high-growth has steadily decreased over the past four decades, driven not only by falling rates of entrepreneurship but also languishing growth among existing firms. Second, this decline is particularly pronounced among young and small firms, while the share of high-growth ...
Working Paper
Transformative and Subsistence Entrepreneurs: Origins and Impacts on Economic Growth
This paper explores the symbiotic relationship between transformative entrepreneurs and inventors, which is crucial for economic growth. We utilize microdata from Denmark to demonstrate that while the relationship between IQ and general entrepreneurship tends to be negative, it is strongly positive among transformative entrepreneurs. Transformative entrepreneurs, often with higher IQ and education levels, significantly drive R&D and business growth, thereby providing substantial opportunities for inventors. In contrast, average entrepreneurs are more influenced by their family's ...