Working Paper: CEPR ID: DP14671
Authors: Vincent Sterk; Petr Sedlek
Abstract: Early indicators suggest that startup activity is heavily disrupted by the COVID-19 pandemic and the associated lockdown. At the same time, empirical evidence has shown that such disturbances may have long-lasting effects on aggregate employment. This paper presents a calculator which can be used to compute these effects under different scenarios regarding (i) the number of startups, (ii) the growth potential of startups, and (iii) the survival rate of young firms. We find that employment losses can be substantial and last for more than a decade, even when the assumed slump in startup activity is only short-lived.
Keywords: startups; macroeconomics; employment; covid19
JEL Codes: D22; E23; E24; I10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Decline in the number of startups (M13) | Reduction in new jobs created (J23) |
| Reduction in new jobs created (J23) | Persistent reduction in aggregate employment (J63) |
| Growth potential of startups (M13) | Future employment levels (J23) |
| Survival rates of young businesses (M13) | Overall employment (J23) |
| Decline in growth potential of startups (D25) | Smaller firm sizes and reduced job creation (L25) |
| Interactions from the above relationships (Y80) | Cumulative employment loss of approximately 106 million jobs over ten years (F66) |