An Aging Dynamo: Demographic Change and the Decline of Entrepreneurial Activity in the United States by Joseph Victor Kopecky :: SSRN

The rate of new business startups has fallen drastically over the last thirty-five years, accelerating greatly since the year 2000. Other measures of business dynamism such as the job reallocation rate are consistent with this trend, raising serious concern given the importance that young, high growth, firms have in employment. The timing of this decline coincides with the start of a steady increase in the age of the United States workforce which has accelerated along with the aging of the baby boomers. I document an empirical ‘hump shape’ between an individual’s propensity to select into entrepreneurship as they age. I then construct life cycle model of entrepreneurial choice that accounts for this hump shape, and study a number of channels that link demographic forces to entrepreneurial selection. I find that demographic channels can account for a large portion of the recent decline in startup activity and predict a continued decline as the pool of potential entrepreneurs continues to age. I conclude with a discussion of the potential policy tools that will affect individual’s life cycle risk attitudes and the predicted effects that such measures will have on the rate of new business startups.

Source: An Aging Dynamo: Demographic Change and the Decline of Entrepreneurial Activity in the United States by Joseph Victor Kopecky :: SSRN

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