Declining Entrepreneurship, Labor Mobility, and Business Dynamism: A Demand-Side Approach

In The News Piece
July 21, 2016

Barry Lynn and Lina Khan's paper, "Out of Business," was cited in a new paper by the Roosevelt Institute about entrepreneurship and business dynamism.

Academics and policymakers have recently focused on a worsening economic phenomenon commonly referred to as the decline in “business dynamism,” that is, the declining rate at which new businesses are formed and the rate at which they grow. This decline in dynamism and entrepreneurship accompanies a decline in overall labor market mobility, including quits and geographic migration for work, and has sparked a new literature on the subject by researchers including the Chairman of the President’s Council of Economic Advisors and numerous other academics, as well as extensive journalistic coverage. However, most of these analyses stress supply-side factors such as excessive occupational licensing and restrictions on building new housing. The data reject these supply-side interpretations, so this paper provides an alternative explanation for the recent trends of declining entrepreneurship, falling labor mobility, and rising concentration of employment in old firms and large firms. ...