The Brookings Institute released a report that asked the question why is the United States firm entry rates decreasing?

The graph shows two key results of the research. The first result Shows that startup rates could be correlated with population decline in certain regions. There is a limitation on the amount of data we have available related to start up and firm formation. The second result suggests that another possibility is at play. The business consolidation rate is the ratio of the average firm size in a region to the average establishment size. There is a growth in multi-establishment businesses. There are potentially other factors at play. Demographics suggest an aging population that is outside of the optimal age of starting a business.

In conclusion, The Brookings Institute suggests that declining population and business consolidation have a statistically significant impact on the rate of firm formation. However, there is not enough statistical evidence to form a policy conclusion. there are potentially other variables not analyzed in the Brookings report that could be the reason for lower third up activity.

Firm Entry Rate Nationally and by State

Florida and the Western half of the United States have substantially more firm entry rates between 1978 and 1980 then the eastern half of the United States. the Western half of the United States has about a 15 to 20% entry rate average compared to the eastern half of the United States which has a 10 to 15% average.

In 2009 and 10 The Firm exit rate overtook The Firm entry rate in the United States. The Brookings Institute has another report Called italics declining business dynamism in the United States a look at States and metros. collectively in 2011, we are seeing about 500,000 business exits and 400000 business entries.

In that report, the entry rate in Construction, Manufacturing Wholesale Trade, Finance, Insurance, & Real Estate are substantially higher than the reallocation rate.


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