Older and Slower: The Startup Deficit’s Lasting Effects on Aggregate Productivity Growth

Titan Alon, David Berger, Robert Dent and Benjamin Pugsley

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: We investigate the link between declining firm entry, aging incumbent firms and sluggish U.S. productivity growth. We provide a dynamic decomposition framework to characterize the contributions to industry productivity growth across the firm age distribution and apply this framework to the newly developed Revenue-enhanced Longitudinal Business Database (ReLBD). Overall, several key findings emerge: (i) the relationship between firm age and productivity growth is downward sloping and convex; (ii) the magnitudes are substantial and significant but fade quickly, with nearly 2/3 of the effect disappearing after five years and nearly the entire effect disappearing after ten; (iii) the higher productivity growth of young firms is driven nearly exclusively by the forces of selection and reallocation. Our results suggest a cumulative drag on aggregate productivity of 3.1% since 1980. Using an instrumental variables strategy we find a consistent pattern across states/MSAs in the U.S. The patterns are broadly consistent with a standard model of firm dynamics with monopolistic competition.

Pages: 50 pages
Date: 2018-06
New Economics Papers: this item is included in nep-bec, nep-ent and nep-sbm
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Citations: View citations in EconPapers (56)

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https://www2.census.gov/ces/wp/2018/CES-WP-18-29.pdf First version, 2018 (application/pdf)

Related works:
Journal Article: Older and slower: The startup deficit’s lasting effects on aggregate productivity growth (2018)
Working Paper: Older and Slower: The Startup Deficit’s Lasting Effects on Aggregate Productivity Growth (2017)
Working Paper: Older and Slower: The Startup Deficit's Lasting Effects on Aggregate Productivity Growth (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:18-29

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