NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Firm Entry and Exit and Aggregate Growth

Jose Asturias, Sewon Hur, Timothy J. Kehoe, Kim J. Ruhl

NBER Working Paper No. 23202
Issued in February 2017, Revised in February 2019
NBER Program(s):Economic Fluctuations and Growth Program, Industrial Organization Program

Using data from Chile and Korea, we find that a larger fraction of aggregate productivity growth is due to firm entry and exit during fast-growth episodes compared to slow-growth episodes. Studies of other countries confirm this empirical relationship. We develop a model of endogenous firm entry and exit based on Hopenhayn (1992). Firms enter with efficiencies drawn from a distribution whose mean grows over time. After entering, a firm’s efficiency grows with age. In the calibrated model, reducing entry costs or barriers to technology adoption generates the pattern we document in the data. Firm turnover is crucial for rapid productivity growth.

download in pdf format
   (638 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23202

Users who downloaded this paper also downloaded* these:
Aghion, Bloom, Lucking, Sadun, and Van Reenen w23354 Turbulence, Firm Decentralization and Growth in Bad Times
Feldstein w23306 Underestimating the Real Growth of GDP, Personal Income and Productivity
Hethey-Maier and Schmieder w19730 Does the Use of Worker Flows Improve the Analysis of Establishment Turnover? Evidence from German Administrative Data
Arora, Belenzon, and Sheer w23187 Back to Basics: Why do Firms Invest in Research?
Feldstein w23221 Why is Growth better in the United States than in other Industrial Countries
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us