heavily dependent on the federal business data system—conducted by the academic and statistical agency research communities.

Business data collected by the statistical agencies are useful for a broad spectrum of research, policy, and commercial purposes. They provide key building blocks for national and local statistics on income, economic output, employment, productivity, investment, and prices. Beyond these headline statistics, micro-level business data are integral to analyses of job creation and destruction, worker flows, opportunities for economic advancement, firm and establishment entry and exit, technology adoption, innovation, business owner characteristics, outsourcing, interactions among firms, and even the impact of natural disasters on local economic activity. Given these wide-ranging interests, the Panel on Measuring Business Formation, Dynamics, and Performance was asked to develop strategies for improving the accuracy, currency, coverage, and integration of data used in academic and agency research on these topics, as well as data used in the production of key national (as well as regional and local) statistics.

The panel’s charge was to (1) catalogue currently available databases, focusing on those produced by the federal statistical system; (2) identify gaps in data sources that impede the production of accurate and timely statistics and that hamper research on business dynamics; and (3) develop recommendations for more effective integration of data sources and for new and improved collection of business data, recognizing legal impediments, survey response rate and burden considerations, and access and confidentiality issues.

Given its historically predominant focus on large and mature businesses, the current federal business data system was designed to provide efficient measures of gross output and net job creation. This is the case because a relatively modest number of well-established businesses account for a large share of the nation’s aggregate economic activity. As it stands, however, the U.S. business data system is inadequate for understanding many of the mechanisms leading to greater productivity and innovation or the dynamics of firm and job creation. The drawback to the current approach is that, when business dynamics vary systematically with business size or age, it can yield less accurate, potentially misleading, measures of changes in economic activity.

Over the past decade, U.S. statistical agencies have markedly improved the measurement of business activity through the development of longitudinal databases, constructed in large part from administrative records. Private research foundations have also supported improvements in databases on young and small businesses. Nonetheless, substantial data gaps remain.

The panel presents a series of recommendations, all consistent with current norms and standards for use of government data in the United

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