The coronavirus crisis may have accomplished something that was not possible with 10 years of economic growth. It spurred a boom in American entrepreneurship.
The lasting mystery of the pre-pandemic economy has been for decades Slump in business formation.. Despite the prominent Silicon Valley success story, the rate of Americans starting a company has been steadily declining.
But, Study published on WednesdayResearchers at the Peterson Institute for International Economics have discovered that Americans started 4.4 million businesses last year. This is a 24 percent increase over the previous year. This is the largest increase on record.
The 2020 boom contrasts with the previous recession, when startup activity fell, as the financial crisis made it difficult for entrepreneurial candidates to raise money. Also, the United States sets itself apart from other rich countries. In other rich countries, startup activity generally declined or increased only slightly last year. One possible factor is trillions of dollars in government support for US households and businesses, far more than was available in past recessions and other countries.
“This was the first recession in the last 50 years and the money supply was higher than it was before the crisis,” said Simeon Jankov, one of the authors of the report.
Retail and warehousing seemed to have the strongest growth, reflecting the e-commerce boom during the pandemic. Healthcare start-ups have also increased significantly.
The report is based on data from Census BureauBroadly defines entrepreneurship and covers everything from part-time freelancers to ambitious technology billionaires. Some businesses may just be side projects started by people stuck at home during the blockade.
However, a narrower subset of start-ups that the Census Bureau considers likely to be adopted also increased by 15.5 percent. Prosperity with a small share can increase employment and productivity in the next few years, Jankov said.
“Sufficient for some of them to make a breakthrough,” he said.
The surge in start-ups is a surprise to the pandemic economy.
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