The U.S. economy shed more than 8 million jobs during the Great Recession, the steepest decline since the end of World War II. But was there a silver lining to the downturn? According to this study, which is the first to use data from the recession to analyze its effect on people’s decisions to start new businesses, this severe shock to the workforce fueled a surge in entrepreneurship.
The recession, which began in late 2007, sent corporate bankruptcy filings and closures soaring, of course, but its effect on business formation is less clear. Many sources of angel investments, bank loans, and venture capital dried up. However, the rapid increase in layoffs, the availability of newly unemployed workers, and a dearth of employment alternatives may have combined to create higher numbers of entrepreneurs than in pre-recession years.
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