Abstract for: Limits to Entrepreneurial Growth: Impact on Firm Demographics and Employment

This paper presents an aggregate business firm demographics model motivated by the concept of ‘creative destruction’ of business activities in a capitalist economy. The model replicates the trends and patterns observed in the U.S. Census Bureau’s ‘business dynamics’ statistics—those relating to the formation and closing of firms and their establishments, the historical transition from startups to mature firms and, eventually, the end of a business life. The model also replicates the aggregate employment pattern associated with employment at age-specific business firm establishments. This is part of a more comprehensive modeling effort that aims to provide a plausible endogenous explanation for the declining trend in the number of start-up firms in the U.S. economy and, more fundamentally, an explanation for the underlying decline in entrepreneurial activity.