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Business Formation: A Tale of Two Recessions

Working Paper Number CES-21-01
EMIN DINLERSOZ, TIMOTHY DUNNE, JOHN HALTIWANGER, AND VERONIKA PENCIAKOVA

Abstract

The trajectory of new business applications and transitions to employer businesses differ markedly during the Great Recession and COVID-19 Recession. Both applications and transitions to employer startups decreased slowly but persistently in the post-Lehman crisis period of the Great Recession. In contrast, during the COVID-19 Recession new applications initially declined but have since sharply rebounded, resulting in a surge in applications during 2020. Projected transitions to employer businesses also rise but this is dampened by a change in the composition of applications in 2020 towards applications that are more likely to be nonemployers.

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