Business Conditions and Business Starts |
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| Authors: | José Mata Banco de Portugal |
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| Affiliation: | Departamento de Estudos Económicos , Banco de Portugal, Rua Francisco Ribeiro , 2, 1150 LISBOA, Portugal Fax: E-mail: e-mail ?Jmata@bportugal.pt |
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| Abstract: | This paper analyses the effect of business conditions on new firm starts. The birth of new firms displays a pro-cyclical behaviour, more firms being created when GDP is growing fast and the interest rate is low. The entry response to industry profitability is tempered by the level of sunk costs; for a given profit signal, more entry occurs where sunk costs are low. |
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| Keywords: | Entry Business starts Sunk costs. JEL classifications: Lll, L60 |
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