Board of Governors of the Federal Reserve System

May 2019

Business Dynamics in the National Establishment Time Series (NETS)

Leland D. Crane and Ryan A. Decker

Abstract:

Business microdata have proven useful in a number of fields, but the main sources of comprehensive microdata are subject to significant confidentiality restrictions. A growing number of papers instead use a private data source seeking to cover the universe of U.S. business establishments, the National Establishment Time Series (NETS). Previous research documents the representativeness of NETS in terms of the distribution of employment and establishment counts across industry, geography, and establishment size. But there exists considerable need among researchers for microdata suitable for studying business dynamics--birth, growth, decline, and death. We evaluate NETS in terms of its ability to corroborate key insights from the business dynamics literature with a particular focus on the behavior of new and young firms. We find that NETS microdata exhibit patterns of business dynamics that are markedly different from official administrative sources, limiting the usefuln ess of NETS for studying these topics.
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Keywords: business microdata, economic measurement, entrepreneurship, firm dynamics, high-growth firms, job flows

DOI: https://doi.org/10.17016/FEDS.2019.034

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