Tuesday, July 5, 2011

Self-Employment And New Businesses Declined During Great Recession

From The Cleveland Federal Reserve Economic Commentary, "The Great Recession’s Effect on Entrepreneurship" by Scott Shane:
Despite the claim that recessions are a time of opportunity for entrepreneurs, the Great Recession had a negative impact on U.S. entrepreneurship. At the end of the recession, the United States had fewer businesses and self-employed people than it had before the downturn began. While some measures indicate that a big part of this decline came from the increased closure of existing businesses, the largest effect came from a decline in new business formation, particularly for businesses with employees, the more economically substantial type of business.

Moreover, the data show that the negative effect of the Great Recession was largest on the most substantial entrepreneurial efforts, adversely affecting new employer firms more than nonemployer businesses, and incorporated self-employment more than unincorporated self-employment. By most available measures, the Great Recession’s effect on entrepreneurship was negative.
Read the complete article here.

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