Firm Entry and Employment Dynamics in the Great Recession

Michael Siemer

No 2014-56, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: The 2007-2009 recession is characterized by: a large drop in employment, an unprecedented decline in firm entry, and a slow recovery. Using confidential firm-level data, I show that financial constraints reduced employment growth in small relative to large firms by 4.8 to 10.5 percentage points. The effect of financial constraints is robust to controlling for aggregate demand and is particularly strong in small young firms. I show in a heterogeneous firms model with endogenous firm entry and financial constraints that a large financial shock results in a long-lasting recession caused by a \"missing generation\" of entrants.

Keywords: Employment; firm entry; financial crisis; small business; financial frictions; slow recovery; start-ups (search for similar items in EconPapers)
JEL-codes: E24 E32 E44 G01 J20 L25 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2014-07-30
New Economics Papers: this item is included in nep-bec, nep-dge, nep-ent, nep-lab, nep-lma, nep-mac and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (81)

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