Business Formation during the Pandemic: Spatial and Industrial Reallocation
TWCF Number
Project Duration
December 1 / 2022
- November 30 / 2024
Core Funding Area
Individual Freedom and Free Markets
North America
Amount Awarded

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John Haltiwanger
Institution University of Maryland

The U.S. Census Bureau's Business Formation Statistics (BFS) showed a significant decrease in new business applications during the early stages of the COVID-19 pandemic, followed by a surge in the second half of 2020 that has continued through March 2022. This surge is the highest on record since data has been available in 2004, with applications for likely new employer businesses in 2021 almost 40% larger than in 2019. 

The increase in applications has been for both new employer and nonemployer businesses.The surge in new business applications has been uneven across sectors and locations, with five 3-digit North American Industry Classification System (NAICS) industries accounting for 50% of the surge. These industries include Nonstore Retail (e-commerce), Professional, Scientific and Technical Services, Truck Transportation, Administration and Support Services, and Personal Services. The surge has been particularly high in states outside of large population centers on the East and West Coasts, with states in the South, Southwest, Midwest, and New England exhibiting especially large increases.

A project led by John Haltiwanger at the University of Maryland aims to study the causes and consequences of this surge in business formation, with a focus on the restructuring and reallocation of activity in terms of both industry and location. The BFS data will be integrated with other sources, such as the Business Employment Dynamics data from the Bureau of Labor Statistics, to quantify the impact of business formation on establishment births, deaths, job creation, and destruction.

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