Recommendation 16: In order to create a comprehensive business list and to generate data that would be useful for studying the dynamics of small and young firms, interagency sharing agreements should extend to data on nonemployers. Data on all sole proprietors and partnerships must also be included, whether they have employees or not.
We believe that a compelling data-driven case has been made, in this report and elsewhere, that reconciliation of the business lists would better serve downstream users—such as BEA in the production of national accounts and the Federal Reserve in carrying out research to inform monetary policy—to an extent that more than warrants the actions recommended here. In order to effect such changes, active support will be needed from within the administration (e.g., the Office of Management and Budget and the Council of Economic Advisers, where it appears to already exist) and from congressional staff. A key element to generating this support involves ensuring that further sharing of business data for statistical purposes does not unduly compromise confidentiality. The political and legal feasibility of such an extension has certainly been enhanced by recent events. The provisions of CIPSEA provide sufficient coverage to continue to ensure that the privacy and confidentiality of records will be maintained, even with expanded sharing of information. Indeed, given the uniform set of confidentiality requirements enacted through CIPSEA, the agencies are now in a better position than ever before to protect data collected for statistical purposes under a pledge of confidentiality.
Finally, one danger associated with improving data quality through cooperative arrangements is that it may increase the risks (or perceived risks) of allowing researcher access. Interagency data sharing efforts are clearly desirable, but precautions must be taken to ensure that the improved richness of the business data source resulting from linking, sharing, or better coordination of administrative and tax records cannot rightly be used as an argument for further restricting access.
In this report, we have presented our views expressing (a) why the United States needs to improve its measures and understanding of business dynamics; (b) why this requires obtaining better data, especially longitudinal information, on new and small businesses than are currently produced; (c) what an ideal data collection system for monitoring business dynamics might look like; and (d) some of the steps that would need to be taken to facilitate an ongoing and feasible data collection effort that is sensitive to confidentiality, legal, and cost considerations.