Professor Petr Sedlacek has paper published in the American Economic Review

Professor Petr Sedlacek, tutor in Economics at Christ Church, has recently had a research paper published in a top general interest economics journal, the American Economic Review. The journal was established in 1911, and is one of the US’s oldest and most respected scholarly journals in economics.

The paper, entitled ‘The Growth Potential of Startups over the Business Cycle’, examines the influence of the time at which a company is founded on the future growth of the company, particularly in relation to periods of recession.

Professor Sedlacek explained, ‘Entrepreneurs know that choosing the right time to start a business is crucial for its later success. In this paper, we show that the health of the aggregate economy at the moment of startup can have significant and lasting effects on the growth of incoming cohorts of startups.

‘Using data on U.S. firms, we show that cohorts of firms which were launched during recessionary periods not only get off at a slower pace, but they also remain persistently smaller on average. This is true even when the aggregate economy recovers.

‘Our findings suggest that large firms which eventually grow and create many jobs tend to be launched during times when consumer demand is high, when it is relatively easy to win new customers. On the contrary, recessionary periods are times when such companies are not founded. This then creates a persistent drag on aggregate employment in later years.

‘Our findings, therefore, offer important insights into how conditions affecting business entry influence aggregate job growth in future years.’

Professor Sedlacek is a tutor in Economics at Christ Church and an Associate Professor in the Department of Economics at the University of Oxford. He is also a Research Fellow at the Centre for Economic Policy Research, and prior to coming to Christ Church was an Assistant Professor at the University of Bonn. His research and teaching interests lie principally in the field of macroeconomics.

The paper is available to read on the American Economic Review website.