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Business creation during COVID-19

Author

Listed:
  • Saleem Bahaj
  • Sophie Piton
  • Anthony Savagar
Abstract
Using UK data, we present greater empirical detail on the puzzling firm dynamics that emerged during coronavirus disease 2019 (COVID-19). We show that firm entry increased during the pandemic across several countries, and this contrasts with typical recessions where firm entry declines. Additionally, the rise in firm entry is driven by individual entrepreneurs creating companies for the first time, particularly in online retail. We find evidence that firm creation responded significantly to declines in retail footfall and that firms created during the pandemic are more likely to exit and less likely to post jobs. Overall, this implies that despite surging firm creation during the pandemic, the overall employment effect is limited. Finally, we find that the primary contributor to limited employment creation is the shift in ownership composition of new entrants during COVID.

Suggested Citation

  • Saleem Bahaj & Sophie Piton & Anthony Savagar, 2024. "Business creation during COVID-19," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 39(119), pages 611-648.
    • Handle: RePEc:oup:ecpoli:v:39:y:2024:i:119:p:611-648.
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    File URL: http://hdl.handle.net/10.1093/epolic/eiae008
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    References listed on IDEAS

    as
    1. Gian Luca Clementi & Berardino Palazzo, 2016. "Entry, Exit, Firm Dynamics, and Aggregate Fluctuations," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(3), pages 1-41, July.
    2. Petr Sedláček & Vincent Sterk, 2017. "The Growth Potential of Startups over the Business Cycle," American Economic Review, American Economic Association, vol. 107(10), pages 3182-3210, October.
    3. Lee, Yoonsoo & Mukoyama, Toshihiko, 2015. "Entry and exit of manufacturing plants over the business cycle," European Economic Review, Elsevier, vol. 77(C), pages 20-27.
    4. Tian, Can, 2018. "Firm-level entry and exit dynamics over the business cycles," European Economic Review, Elsevier, vol. 102(C), pages 298-326.
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    Cited by:

    1. Van Dijcke, David & Buckmann, Marcus & Turrell, Arthur & Key, Tomas, 2023. "Vacancy posting, firm balance sheets, and pandemic policy," Bank of England working papers 1033, Bank of England.
    2. Ascari, Guido & Colciago, Andrea & Silvestrini, Riccardo, 2023. "Business dynamism, sectoral reallocation and productivity in a pandemic," European Economic Review, Elsevier, vol. 156(C).
    3. Daniel E. Rigobon & Thibaut Duprey & Artur Kotlicki & Philip Schnattinger & Soheil Baharian & Thomas R. Hurd, 2022. "Business Closures and (Re)Openings in Real-Time Using Google Places: Proof of Concept," JRFM, MDPI, vol. 15(4), pages 1-10, April.

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    More about this item

    Keywords

    E32; L25; L26;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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