The Troubling Decline of American Business Dynamism

Tyler Cowen calls it the “great stagnation.” Former Treasury Secretary Larry Summers has proclaimed that the United States has entered a period of “secular stagnation.” Whatever its name, a growing number of researchers and economists are concerned that the U.S. is a less economically innovative country than it was even a decade ago.

A new Brookings study by Ian Hathaway and Robert Litan released today provides empirical evidence of America’s declining business dynamism over the past decade, and especially since the economic crisis and recovery. It builds on their earlier research, which I covered back in May, that found the U.S. economy to be less dynamic across all major industries, as well as across geographic regions. The new study uses data from the Census Bureau’s Business Dynamics Statistics dating back to 1977 to measure the flows of businesses and employees across sectors, regions and firm sizes.