Two recent papers highlight findings based on the Census Bureau’s Business Dynamics Statistics (BDS) that show declining rates of business dynamism over the last few decades. Census Bureau Business Dynamics Statistics provide data on number of establishments and year-to-year change in employment for births, deaths, expansions, and contractions by firm age and employment size.

The first paper, The Role of Entrepreneurship in U.S. Job Creation and Economic Dynamism, which I co-authored with the Census Bureau’s Javier Miranda and Ryan Decker and John Haltiwanger of the University of Maryland, appeared in the Summer 2014 issue of the Journal of Economic Perspectives. The second paper is a recent Brookings report by Hathaway and Litan.

A central finding in these papers is that rates of new firm start-ups have been declining since the early 1980s (see the figure from Decker et al. below).Seemingly, this trend is not of great concern. However, young entrepreneurial businesses are an important source of job creation in the U.S. economy (see Haltiwanger, Jarmin and Miranda 2013). Also, the churn of firms in the economy and the associated reallocation of resources are critical components of productivity growth (for a review, see Syverson 2011).

As these papers report, we do not have a satisfactory explanation for the declining pace of business dynamism. Nor do we fully understand the broader implications on productivity and economic growth. We need more research with data such as the BDS to resolve these gaps in our understanding of the economy.

Here’s a sampling of recent blogs about these findings:

Conversable Economist

Vox

Fivethirtyeight: