We relish startups. Twitter (TWTR), Facebook (FB) and Tesla (TSLA) are stock-market darlings. Steve Jobs, Elon Musk and Mark Zuckerberg are far more admired than any CEO who rose through the ranks. Starting a company and taking it public is one of our favorite David-and-Goliath narratives.

We’re not as entrepreneurial as we think we are, however — or as we used to be. And a sharp decline in the startup economy could have a lot to do with stagnant living standards and other financial pressures many Americans feel.

New research by economists Robert Litan of the Brookings Institution and Ian Hathaway of Ennsyte Economics shows fewer new firms are being created and more of those created are failing. Older and larger firms, meanwhile, account for a growing portion of economic activity. And this is not a recent development that can be blamed on the recession, but a 30-year trend that has intensified in recent years. “The business sector of the United States appears to be getting ‘old and fat,’” the researchers conclude.

There’s nothing inherently wrong with big, established businesses. Much-admired Apple (AAPL), which has now been around for about 35 years, is one. IBM (IBM), General Electric (GE) and Warren Buffett’s Berkshire Hathaway (BRK-A) are regarded as model firms that have weathered many booms and busts. Older firms, however, tend to be conservative operations that stick with what works and have less incentive to innovate than newcomers fighting for survival. “An economy that is saturated with older firms is one that is likely to be less flexible, and potentially less productive and less innovative than an economy with a higher percentage of new and young firms,” Litan and Hathaway write.

New firms also tend to hire the most, since they grow the fastest. Many of those firms fail, of course, but on balance, startups that grow into mid-sized firms and occasionally into titans — think Google (GOOG), Microsoft (MSFT) and Amazon (AMZN) — generate the kind of robust economic growth that keeps people employed and pay rising. In that regard, it’s probably not surprising that “jobless recoveries” have become the norm and more adults have dropped out of the labor force during the same time startup activity has waned.

In 1978, about 15% of all U.S. firms were startups. By 2011, that had fallen to about 8%. The failure rate of new firms is more jagged, falling from 10% in 1978 to 8% in 2002, but since then creeping back up to more than 9%. Fewer startups, by definition, means older firms will account for a larger portion of all firms. The chart below shows a breakdown by age, with firms that have been around for 16 years or more gaining market share, as it were, and all others losing share:

View photos Source: Brookings Institution More

Economists aren’t sure why there’s a shortage of startups. Entrepreneurship, in theory, is more popular than ever. The 2011 biography of Steve Jobs was a mega bestseller. The TV show “Shark Tank”, which features entrepreneurial hopefuls pitching ideas to business barons such as Mark Cuban and Barbara Corcoran, has been a surprise hit. Entrepreneurship, meanwhile, has become a routine part of the curriculum at business schools.

Other recent trends ought to make it easier, not harder, to start a business. The cost of computers and other office equipment has plunged, and cloud computing now offers anybody plenty of cheap (or even free) digital storage. Crowdfunding sites includingKickstarter have gone from oddball to mainstream, even blessed by the federal government. Still, the startup numbers contradict the cultural and economic appeal.

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