The coronavirus crisis may have achieved something that could not be accomplished by a decade of economic growth: it spurred a boom in U.S. entrepreneurship.
The decades-long slump in business creation was an enduring mystery of the pre-pandemic economy. The rate at which Americans start companies has been steadily declining, despite prominent Silicon Valley success stories.
But researchers at the Peterson Institute for International Economics found in a study released on Wednesday that Americans started 4.4 million businesses last year, a 24 percent rise from the year before. It is the largest rise on record by far.
The 2020 boom stands in contrast to the last recession, when start-up activity fell, in part because the financial crisis made it hard for would-be entrepreneurs to get funding. It also sets the United States apart from other rich countries, where start-up activity generally fell last year or rose only slightly. One likely factor is the trillions of dollars in government support for U.S. households and businesses, far more than was available in past recessions or in other countries.
“This is the first recession in the last 50 years where the supply of money is larger than before the crisis,” said Simeon Djankov, one of the report’s authors.
In retail and wholesale firms, growth tended to be fastest, perhaps reflecting the rise in e-commerce during the pandemic. There was also a significant growth in start-ups in health care.
Based on Census Bureau statistics, the study narrowly describes entrepreneurship, representing anything from part-time freelancers to emerging tech billionaires. Any organizations could be nothing more than side ventures launched during the lockdown by individuals left at home.
Yet by 15.5 percent, a smaller group of start-ups that the Census Bureau finds likely to employ have grew. If even a small proportion of them prosper, it could improve jobs and growth in years to come, Mr. Djankov said.
"It is enough to make breakthroughs for a few of them," he said.