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May 4, 2007

• Report Briefing •

Panel on Measuring Business Formation,

Business Dynamics, and Performance


Sponsored by the

Ewing Marion Kauffman Foundation

and conducted by the

Committee on National Statistics

May 4, 2007

Co
-
Chairs of the Panel


John Haltiwanger

Lisa Lynch

May 4, 2007

Charge to Panel


Catalog existing business data infrastructure


Identify gaps in measurement of business
dynamics


Identify gaps in measures in research on topics
including business entry and exit, business
adaptation and growth and the dynamics of
young and small businesses


Develop recommendations for better use of
existing data sources including better data
integration and for new and improved collection
of business data

May 4, 2007

Recent Remarks by Federal Reserve
Chairman Ben Bernanke

…One leading explanation for the strong U.S. productivity
growth is that labor markets in the United States tend to be
more flexible and competitive, market characteristics that
have allowed the United States to realize greater economic
benefits from new technologies. For example, taking full
advantage of new information and communication
technologies may require extensive reorganization of work
practices, the reassignment and retraining of workers, and
ultimately some reallocation of labor among firms and
industries…


August 31, 2006

May 4, 2007

Excerpt from
Economic Report of the
President, 2007

…New businesses provide both a ready supply of new ideas
and a source of competition that forces larger businesses to
innovate. Both of these factors have likely given the United
States an edge in taking advantage of new opportunities
made possible by IT advances. As with flexible labor
markets, the ease of starting a new business helps with the
level and the growth rate of productivity. Over long periods
of time, starting new businesses keeps the economic
environment competitive, which spurs innovation and
helps push inefficient firms out of the market place…


Chapter 2, Page 61

May 4, 2007

Recommendation 11


BLS and the Census Bureau should cooperate
under the auspices of the current and an
enhanced Confidential Information Protection
and Statistical Efficiency Act to create a
reconciled, consolidated integrated business
establishment list



Improve sampling efficiency


Improve data quality

May 4, 2007

Recommendation 12


The quality of research based on business data produced
by the statistical agencies would improve with greater
interaction between outside researchers and businesses
and the statistical agencies. Research that informs social
and economic policy should be considered a valid reason
for accessing confidential data.



Significant recent advances made on this front by Census
and IRS

May 4, 2007

Recommendation 13


It would be highly desirable if the business registers were
available to federal agencies for the purpose of
constructing sampling frames



e.g. Allow the SBA or Federal Reserve to have samples
drawn from business register for samples for surveys they
conduct

May 4, 2007

Recommendation 15


Measures should be taken to facilitate the
expansion of CIPSEA to increase the kinds of
information that could be shared among the
statistical agencies for the purpose of reconciling
the business list and for the design of special
surveys

May 4, 2007

Recommendation 16


Interagency sharing agreements should extend to data on
nonemployers. Data on sole proprietors and partnerships
must also be included, whether they have employers or
not.



Precautions taken to ensure that this increase in sharing
does not get used as an argument for further restricting
access


May 4, 2007

Recent Remarks by Federal Reserve
Chairman Ben Bernanke

…One leading explanation for the strong U.S. productivity
growth is that labor markets in the United States tend to be
more flexible and competitive, market characteristics that
have allowed the United States to realize greater economic
benefits from new technologies. For example, taking full
advantage of new information and communication
technologies may require extensive reorganization of work
practices, the reassignment and retraining of workers, and
ultimately some reallocation of labor among firms and
industries…


August 31, 2006

May 4, 2007

Excerpt from
Economic Report of the President,
2007

…New businesses provide both a ready supply of new ideas and a source
of competition that forces larger businesses to innovate. Both of these
factors have likely given the United States an edge in taking advantage
of new opportunities made possible by IT advances. As with flexible
labor markets, the ease of starting a new business helps with the level
and the growth rate of productivity. Over long periods of time, starting
new businesses keeps the economic environment competitive, which
spurs innovation and helps push inefficient firms out of the market
place…


Chapter 2, Page 61

May 4, 2007

Recommendation 1


Census and BLS should increase the sampling of
younger business units in their business surveys.



Use business age as a stratifying variable in
sample design.


Promptly capture new entrants in the business
lists that serve as sample frames.

May 4, 2007

Recommendation 2


BLS and Census should expand their
development of statistical programs that measure
business formation and dissolution, business
dynamics, and job creation and destruction



Business Employment Dynamics (BED)


Statistics of U.S. Businesses (SUSB)

May 4, 2007

Recommendation 3


Census and BLS should exploit their
administrative
-
records data to produce public
-
release statistics with breakdowns of economic
activity by business age.



Readily available indicators of business age include:


Application date for Employer ID No. (EIN)


First period with positive revenues


First period with positive payroll

May 4, 2007

Recommendation 8


Census and BLS should actively pursue opportunities to
acquire micro data sets from commercial sources and
from other government agencies. These data sets should
be integrated into existing business
-
level data sets at
Census and BLS.



E.g., venture capital, small business lending, government
contract awards


Use integrated data to produce new public
-
release
statistics by source and type of financing and new tools for
statistical analysis.

May 4, 2007

Recommendation 14


BLS and Census should develop anonymized, public
-
use
versions of their existing longitudinal business data sets.



Use synthetic data or other techniques that protect
confidentiality of individual businesses.


Source material:


Longitudinal Database on Businesses (BLS)


Longitudinal Business Database (Census)


Integrated Longitudinal Business Database (Census)

May 4, 2007


May 4, 2007

Recommendation 4

The Census Bureau should periodically add a module to
the American Community Survey (or possibly the Current
Population Survey) to identify nascent entrepreneurs. A
method should be developed for linking this survey
information with subsequent business identifiers in a
longitudinal household
-
business data infrastructure so that
transitions from nascent to active status (and vice versa) and
from nonemployer to employer status (and vice versa) can
be measured and studied.

May 4, 2007

Recommendation 5

The Census Bureau’s SBO should be conducted on an
annual basis. The survey should include both a longitudinal
component and a flexible, modular design that allows
survey content to change over time. In addition, the Census
Bureau should explore the possibility of creating a public
-
use (anonymized) SBO or a restricted access version of the
data file.

May 4, 2007

Recommendation 6

The Census Bureau should develop a fully integrated
longitudinal household
-
business data infrastructure from
administrative data to serve as a platform for tracking
business formation, for integrating household and business
survey data for measuring economic activity associated with
the business formation process, and for developing samples
for new surveys of business dynamics. The integration
should include the master household address files, the job
frame from linked employer
-
employee administrative
records, and data for firms (including those with no paid
employees, but with receipts) from the Census Bureau
business register.

May 4, 2007

Recommendation 7

BLS and the Census Bureau should jointly develop
intermittent topical modules for their business surveys.
These topical modules should be designed to allow periodic
measurement in the same survey and with the same
business sample of variables usually collected in separate
surveys and at different frequencies.

May 4, 2007

Recommendation 8

The Census Bureau and BLS should explore and actively
pursue opportunities to acquire microdata sets

on venture
capital investment, business financing, and small business
lending

from commercial sources and from other
government statistical agencies. Once acquired, these data
sets should be integrated with existing business
-
level data
sources at the Census Bureau and BLS to produce new
public
-
release statistics on business activity by source and
type of financing and to provide new tools for statistical
analysis by qualified researchers.

May 4, 2007

Recommendation 9

The Office of Management and Budget should investigate
the possibility of developing a common taxonomy, based
on the extensible business reporting language (XBRL) to
allow common definitions to be used in surveys and
administrative sources that can be automatically extracted
from accounting and other business management software.
In so doing, they should work with the statistical agencies,
the Internal Revenue Service (IRS), accountancy
organizations, and software providers. This will help meet
the goals of paperwork reduction and may have
applications for similar purposes beyond the statistical
system.

May 4, 2007

Recommendation 10

BLS and the Census Bureau should explore the possibility
of continuous, real
-
time integration of payroll and
employment data that are maintained by third parties into
their systems; this could streamline data collection and,
ultimately, possibly reduce respondent burden.

May 4, 2007