Working Paper: NBER ID: w28787
Authors: Catherine E. Fazio; Jorge Guzman; Yupeng Liu; Scott Stern
Abstract: Leveraging data from eight U.S. states from the Startup Cartography Project, this paper provides new insight into the changing nature and geography of entrepreneurship in the wake of the COVID pandemic. Consistent with other data sources, following an initial decline, the overall level of state-level business registrations not only rebounds but increases across all eight states. We focus here on the significant heterogeneity in this dynamic pattern of new firm formation across and within states. Specifically, there are significant differences in the dynamics of new business registrants across neighborhoods in terms of race and socioeconomic status. Areas including a higher proportion of Black residents, and more specifically higher median income Black neighborhoods, are associated with higher growth in startup formation rates between 2019 and 2020. Moreover, these dynamics are reflected in the passage of the major Federal relief packages. Even though legislation such as the CARES Act did not directly support new business formation, the passage and implementation of relief packages was followed by a relative increase in start-up formation rates, particularly in neighborhoods with higher median incomes and a higher proportion of Black residents.
Keywords: COVID-19; entrepreneurship; business registration; economic recovery; startup formation
JEL Codes: L26; R12; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| federal relief packages (H84) | increase in startup formation rates (L26) |
| COVID-19 (I15) | increase in new business registrations (M13) |
| higher proportion of black residents (R23) | greater growth in startup formation rates (L26) |
| higher median incomes (J31) | greater growth in startup formation rates (L26) |
| CARES Act (H84) | increase in startup formation rates (L26) |
| supplemental relief act (H84) | increase in startup formation rates (L26) |