Capital Reallocation and Private Firm Dynamics

This paper supersedes an earlier manuscript dated November 2021 circulated under the title of “A Theory of Business Transfers.” We thank audiences at the Bank of Canada, European University Institute (EUI), NYU, Princeton, Stanford, LSE, Duke, UCL, Cornell, ASU, University of Connecticut, Wharton, Williams College, William & Mary, UW-Milwaukee, Yale, Einaudi Institute for Economics and Finance, Rochester, IMF, CEMFI, CREI, University of Toronto, University at Albany, Boston University, Federal Reserve Banks of Chicago, St. Louis, Richmond, Philadelphia, New York, and Dallas, LAEF Conference on Labor Markets, the Society of Economic Dynamics, the NBER Summer Institute, and the conference in honor of Bob Hall. This work is part of a project through the Joint Statistical Research Program of the Statistics of Income Division of the United States Internal Revenue Service. We acknowledge support from the National Science Foundation (Award #2214248). The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and do not necessarily reflect the views or the official positions of the U.S. Department of the Treasury or the Internal Revenue Service. All results have been reviewed to ensure that no confidential information is disclosed. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

• September 30, 2025