Texas A&M University
1101 Hollow Creek Dr. Unit 2208
Austin, TX 78704
Institutional Affiliation: Texas A&M University
Information about this author at RePEc
NBER Working Papers and Publications
|June 2019||The Role of Nonemployers in Business Dynamism and Aggregate Productivity|
with Diego Restuccia: w25998
A well-documented observation of the U.S. economy in the last few decades has been the steady decline in the net entry rate of employer firms, a decline in business dynamism, suggesting a possible connection with the recent slowdown in aggregate productivity growth. We consider the role of nonemployers, businesses without paid employees, in business dynamism and aggregate productivity. Notwithstanding the decline in the growth of employer firms, we show that the total number of firms, which includes nonemployer businesses, has increased in the U.S. economy since the early 1980s. We interpret this trend, along with the evolution of the employment distribution across firms, through the lens of a standard theory of firm dynamics. The model implies that firm dynamics have contributed to an ave...
|August 2018||On Average Establishment Size across Sectors and Countriesy|
with Diego Restuccia: w24968
We construct a new dataset for the average employment size of establishments across sectors and countries from hundreds of sources. Establishments are larger in manufacturing than in services, and in each sector they are larger in richer countries. The cross-country income elasticity of establishment size is remarkably similar across sectors, about 0.3. We discuss these facts in light of several prominent theories of development such as entry costs and misallocation. We then quantify the sectoral and aggregate impact of entry costs and misallocation in an otherwise standard two-sector model with endogenous firm entry, firm-level productivity, and sectoral employment shares. We find that observed measures of misallocation account for the entire range of establishment-size differences across...
|November 2016||Misallocation, Establishment Size, and Productivity|
with Diego Restuccia: w22809
We consider a tractable model of heterogeneous production units that features endogenous entry and productivity investment to assess the quantitative impact of policy distortions on aggregate output and establishment size. Relative to the standard factor misallocation framework, policy distortions featuring a positive productivity elasticity of distortions imply larger reductions in output through smaller investments in establishment productivity. A calibrated version of the model implies that when the productivity elasticity of distortions increases from 0.09 in the U.S. to 0.5 in India, aggregate output and average establishment size fall by 53 and 86 percent, compared to 37 and 0 percent in the standard factor misallocation model. Entry productivity investment and factor misallocation ...
Published: Pedro Bento & Diego Restuccia, 2017. "Misallocation, Establishment Size, and Productivity," American Economic Journal: Macroeconomics, vol 9(3), pages 267-303. citation courtesy of