DP14671 Startups and Employment Following the COVID-19 Pandemic: A Calculator

Author(s): Petr Sedlacek, Vincent Sterk
Publication Date: April 2020
Keyword(s): COVID-19, employment, Macroeconomics, Startups
JEL(s): D22, E23, E24, I10
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14671

Early indicators suggest that startup activity is heavily disrupted by the COVID-19 pandemic and the associated lockdown. At the same time, empirical evidence has shown that such disturbances may have long-lasting effects on aggregate employment. This paper presents a calculator which can be used to compute these effects under different scenarios regarding (i) the number of startups, (ii) the growth potential of startups, and (iii) the survival rate of young firms. We find that employment losses can be substantial and last for more than a decade, even when the assumed slump in startup activity is only short-lived.