Abstract
ABSTRACTConventional wisdom suggests that labor market distress drives workers into temporary self‐employment, lowering entrepreneurial quality. Analyzing employment histories for 640,000 U.S. workers, we document that graduating college during a period of high unemployment does increase entry to entrepreneurship. However, compared to voluntary entrepreneurs, firms founded by forced entrepreneurs are more likely to survive, innovate, and receive venture backing. Explaining these results, we confirm that labor shocks disproportionately impact high earners, with these workers starting more successful firms. Overall, we document untapped entrepreneurial potential across the top of the income distribution and the role of recessions in reversing this missing entrepreneurship.
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