EIG has just published my new report outlining whether AI is causing a boom in entrepreneurship.
How much will Artificial Intelligence boost productivity? Will unemployment rates rise and, if so, by how much? Will AI transform the economy quickly or, like previous general purpose technologies, will it take many years or even decades?
These and so many other questions about the impact of AI on the economy remain unanswered. Or at least it is hard to feel confident in answering them. But there is one exception, at least for me: I am extremely confident that AI will increase entrepreneurship.1
And it will matter enormously for the economy. Each year, roughly 400–500,000 new firms enter the market. Few survive, but from those that do, a small subset will grow quickly and contribute disproportionately to overall job creation. Unburdened by the weight of legacy systems, processes, and technologies, young firms introduce new ideas, products, services, and ways of doing things.
Those are the startups with employees. Other startups, known as nonemployers or “solopreneurs,” will have no employees and be run entirely by their founder, either as the founder’s primary source of income or as a sidegig.
Recent stories in the New York Times, Washington Post, Wall Street Journal, The Economist, and other outlets suggest that AI has already started boosting entrepreneurship. It would be unsurprising, as startup activity often climbs during times of rapid technological change. And I would love to believe that it is already happening.
I have just published a new EIG analysis scrutinizing the available federal statistics in detail. And unfortunately, I find that the trend is simply not yet reflected in the data. In fact, separate from the question of AI’s effects, entrepreneurship itself may no longer be enjoying the post-COVID spike that raised hopes of a sustained new era of economic dynamism. My key findings are:
Likely employer business applications were flat in 2025 and started rising in 2026, but fewer of them are of the type most likely to hire employees.
Likely nonemployer applications rose sharply in 2025 and early 2026, but they are probably side-gigs because they don’t show up as individuals’ primary source of income.
AI doesn’t seem to have much to do with any of this beyond the surge of likely nonemployers in the information and professional services sector. (Which, again, are likely side-gigs.)
This may change soon. I hope it does. But for now, an entrepreneurial renaissance just isn’t jumping out of the data. Again, the new analysis — which includes a detailed investigation of the strengths and weaknesses of the different methodologies that monitor this trend — can be found here.
My confidence is built on both theoretical and empirical foundations. For supporting theory, for example, see Aghion and Howitt’s 1992 paper A Model of Growth Through Creative Destruction, which makes the case that innovation induces creative destruction. For supporting empirics, see Gort and Klepper’s 1992 paper Time Paths in the Diffusion of Product Innovations, which shows the historical relationship between product innovations and business entry.
And here are some of the specific reasons to think that AI will increase entrepreneurship:
A need to experiment. Startups introduce and test new ideas, products, and services resulting from AI against the market.
Education. Prospective founders can more easily learn about a market or product.
Lower transaction costs. Allows workers to use nonemployers as an alternative to traditional employment relationships.
Opportunity spinouts. Solo-productivity may rise relative to wages, causing skilled workers to found firms rather than remain as employees.
Lower entry costs. Prospective founders find it easier to clear administrative hurdles and launch and manage a business.
Lower fixed costs. AI could substitute for hired or contracted labor, like for marketing or legal services, and make it easier to access financing.
Necessity driven. Some workers may move to self-employment after AI-driven displacement.
I don’t buy your reasoning. How will AI lower the costs of starting and operating a business?