NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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The Role of Nonemployers in Business Dynamism and Aggregate Productivity

Pedro Bento, Diego Restuccia

NBER Working Paper No. 25998
Issued in June 2019, Revised in January 2020
NBER Program(s):Development Economics, Economic Fluctuations and Growth, Productivity, Innovation, and Entrepreneurship

A decline in the net entry rate of employer firms in the United States in the last decades, a decline in business dynamism, may explain the observed productivity slowdown. We consider the role of nonemployers, businesses without paid employees, in business dynamism and aggregate productivity. Despite the decline in the growth of employer firms, the total number of firms has increased since the early 1980s, which in the context of a standard model of firm dynamics implies an average annual growth of aggregate productivity of 0.26-0.39%, over one quarter of the productivity growth in the data.

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Document Object Identifier (DOI): 10.3386/w25998

 
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