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  3. American Economic Review
  4. May 2016
  5. The Role of Startups in Structural Transformation

The Role of Startups in Structural Transformation

  • Robert C. Dent
  • Fatih Karahan
  • Benjamin Pugsley
  • Ayşegül Şahin
American Economic Review
vol. 106, no. 5, May 2016
(pp. 219-23)
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Abstract

The U.S. economy has been going through a striking structural transformation--the secular reallocation of employment across sectors--over the past several decades. We propose a decomposition framework to assess the contributions of various margins of firm dynamics to this shift. Using firm-level data, we find that at least 50 percent of the adjustment has been taking place along the entry margin, due to sectors receiving different shares of startup employment than their employment shares. The rest is mostly due to life cycle differences across sectors. Declining overall entry has a small but growing effect of dampening structural transformation.

Citation

Dent, Robert C., Fatih Karahan, Benjamin Pugsley, and Ayşegül Şahin. 2016. "The Role of Startups in Structural Transformation." American Economic Review, 106 (5): 219-23. DOI: 10.1257/aer.p20161053

Additional Materials

JEL Classification

  • D22 Firm Behavior: Empirical Analysis
  • D25 Intertemporal Firm Choice, Investment, Capacity, and Financing
  • J23 Labor Demand
  • L26 Entrepreneurship
  • M13 New Firms; Startups