A reader kindly sent me a spreadsheet with data from the business dynamics survey, in order to see if one can locate periods that correspond to the quadrant here. Some remarks on the data.
1. The rate of entry of new businesses (new businesses started per year as a percentage of existing businesses) was much higher in the late 1970s and in the 1980s than in subsequent years. One can tell stories for this, of course, but it is not what I would have expected.
2. The rate of entry of new businesses from 1994-2007 ranged from a low of 11.4 percent in 2000 to a high of 12.9 percent in 1997. In contrast, the figures for 2008-2011 were 10.4, 9.0, 10.0, and 10.4 percent, respectively.
3. The rate of exit of businesses from 2008-2011 was not too much higher than that in the 1994-2007 period. For the most part, the exit rate stayed between 10.0 percent and 11.9 percent from 1994 through 2011. The exceptional years were 2003-2005, when the exit rate was less than 10 percent.
The year 2009 stands out as a year of low creation and high destruction. This is consistent with the Minsky Recession story, but one could always choose to call it an aggregate demand story.
There’s a statistically significant relationship between net-entry rate and year-over-year change in real, private-sector GDP (C + I + NX): y = 0.214x + 0.011 (n = 35, r-squared = 0.14, t = 0.006). I used that relationship to normalize net-entry rate for fluctuations in real GDP. A plot of the normalized rate against year shows decided downward trend in net-entry rate. This is consistent with the decided downward trend in the real rate of GDP growth since the end of World War II. I attribute these downward trends to the upward trend in government spending (including “social transfers”) and the ever-mounting tally of additions to the Code of Federal Regulations (https://www.federalregister.gov/uploads/2013/05/OFR-STATISTICS-CHARTS-ALL1-1-1.xls).
Not in the field, so having a hard time finding this on the census website…
How do they measure establishment birth? Is this an answer to a question like “did you start a new business?”, or is it tracking business incorporations or registrations with state or local agencies? Would sole proprietorships be counted in this measure or missed?
My caveat is that you can be more successful as a sole proprietor or self-employed person today than you could 20 years ago. While that model may not create “employment”, they can create a non-firm network of demand for complimentary services.
The real fruitfulness of macro is that there is always another story that can be made or forced to fit a set of facts, thus the efforts of macro practioners do not suffer from diminishing returns.