Cyclical Patterns of Business Entry and Exit Dynamics in the US Economy

Abstract

This paper documents the cyclical patterns of business entry and exit dynamism in the US using the Business Dynamic Statistics (BDS) dataset. The main finding is that, for both firms and establishments, the entry margin is significantly procyclical while the exit margin shows little cyclicality. In addition to the entry and exit rates, the numbers and relative sizes of entering and exiting businesses exhibit similar patterns over the business cycles. I then examine the roles of size, age, and sector in shaping the observed cyclicality, or lack thereof, and find significant variation across different groups.