University of Exeter
Institutional Affiliation: University of Exeter
NBER Working Papers and Publications
|December 2018||From Population Growth to Firm Demographics: Implications for Concentration, Entrepreneurship and the Labor Share|
with Hugo Hopenhayn, Julian Neira: w25382
The US economy has undergone a number of puzzling changes in recent decades. Large firms now account for a greater share of economic activity, new firms are being created at a slower rate, and workers are getting paid a smaller share of GDP. This paper shows that changes in population growth provide a unified quantitative explanation for these long-term changes. The mechanism goes through firm entry rates. A decrease in population growth lowers firm entry rates, shifting the firm-age distribution towards older firms. Heterogeneity across firm age groups combined with an aging firm distribution replicates the observed trends. Micro data show that an aging firm distribution fully explains i) the concentration of employment in large firms, ii) and trends in average firm size and exit rates, k...