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America’s Aging Economy

As baby boomers continue to retire, not only is the population of the United States growing older but so is the structure of our economy.

In a study just published on the Brookings Institution’s Web site, Ian Hathaway and I found that the share of mature firms, or those at least 16 years old, rose 50 percentage points between 1992 and 2011, from 23% to 34% of all firms in the U.S. economy. Not surprisingly, the share of all private-sector workers employed in such mature firms rose over the same time, from 60% to 72%.

Older firms may have more experience, but they are less likely to develop and commercialize the path-breaking innovations more characteristic of younger firms (think of the car, the airplane, air-conditioning, computers, Internet search). Yet Ian and I found that one of the main reasons for the aging firm structure is the declining share of not only startups but firms of all age groups short of the 16-year mark.

It may surprise some that we did not find a strong statistical link between the growing consolidation of U.S. firms and the aging of the firm structure.

Our study fuels the argument that a resurgence of entrepreneurship is needed in this country.


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