The Nature of Firm Growth
American Economic Review
vol. 111,
no. 2, February 2021
(pp. 547-79)
Abstract
About one-half of all startups fail within five years, and those that survive grow at vastly different speeds. Using Census microdata, we estimate that most of these differences are determined by ex ante heterogeneity rather than persistent ex post shocks. Embedding such heterogeneity in a firm dynamics model shows that the presence of ex ante heterogeneity (i) is a key determinant of the firm size distribution and firm dynamics, (ii) can strongly affect the macroeconomic effects of firm-level frictions, and (iii) helps understand the recently documented decline in business dynamism by showing a disappearance of high-growth startups ("gazelles") since the mid-1980s.Citation
Sterk, Vincent ⓡ Petr Sedláček ⓡ Benjamin Pugsley. 2021. "The Nature of Firm Growth." American Economic Review, 111 (2): 547-79. DOI: 10.1257/aer.20190748Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- J23 Labor Demand
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- M13 New Firms; Startups