TY - JOUR AU - Davis,Steven J. AU - Haltiwanger,John AU - Jarmin,Ron AU - Miranda,Javier TI - Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms JF - National Bureau of Economic Research Working Paper Series VL - No. 12354 PY - 2006 Y2 - July 2006 UR - http://www.nber.org/papers/w12354 L1 - http://www.nber.org/papers/w12354.pdf N1 - Author contact info: Steven J. Davis Booth School of Business The University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-7312 Fax: 773/834-0733 E-Mail: Steven.Davis@ChicagoBooth.edu John C. Haltiwanger Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3504 Fax: 301/405-3542 E-Mail: haltiwan@econ.umd.edu Ron S. Jarmin Center for Economic Studies U.S. Census Bureau 4600 Silver Hill Road Washington, DC 20233 Tel: 301.763.1858 Fax: 301.763.5935 E-Mail: ron.s.jarmin@census.gov Javier Miranda U.S. Bureau of the Census Center for Economic Studies 4600 Silver Hill Road Washington, DC 20233 Tel: 301-763-6466 E-Mail: javier.miranda@census.gov M1 - published as Steven J. Davis, John Haltiwanger, Ron Jarmin, Javier Miranda. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," in Daron Acemoglu, Kenneth Rogoff and Michael Woodford, editors, "NBER Macroeconomics Annual 2006, Volume 21" MIT Press (2007) M2 - featured in NBER digest on 2006-07-03 AB - We study the variability of business growth rates in the U.S. private sector from 1976 onwards. To carry out our study, we exploit the recently developed Longitudinal Business Database (LBD), which contains annual observations on employment and payroll for all U.S. businesses. Our central finding is a large secular decline in the cross sectional dispersion of firm growth rates and in the average magnitude of firm level volatility. Measured the same way as in other recent research, the employment-weighted mean volatility of firm growth rates has declined by more than 40% since 1982. This result stands in sharp contrast to previous findings of rising volatility for publicly traded firms in COMPUSTAT data. We confirm the rise in volatility among publicly traded firms using the LBD, but we show that its impact is overwhelmed by declining volatility among privately held firms. This pattern holds in every major industry group. Employment shifts toward older businesses account for 27 percent or more of the volatility decline among privately held firms. Simple cohort effects that capture higher volatility among more recently listed firms account for most of the volatility rise among publicly traded firms. ER -