Firm Entry and Exit and Aggregate Growth

Jose Asturias, Sewon Hur, Timothy Kehoe and Kim Ruhl

No 544, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: Using data from Chile and Korea, we find that a larger fraction of aggregate productivity growth is due to firm entry and exit during fast-growth episodes compared to slow-growth episodes. Studies of other countries confirm this empirical relationship. We develop a model of endogenous firm entry and exit based on Hopenhayn (1992). Firms enter with efficiencies drawn from a distribution whose mean grows over time. After entering, a firm?s efficiency grows with age. In the calibrated model, reducing entry costs or barriers to technology adoption generates the pattern we document in the data. Firm turnover is crucial for rapid productivity growth.

Keywords: Exit; Entry; Entry barriers; Barriers to technology adoption; Productivity (search for similar items in EconPapers)
JEL-codes: E22 O10 O38 O47 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2017-02-21
New Economics Papers: this item is included in nep-bec, nep-dge, nep-eff, nep-mac and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Related works:
Journal Article: Firm Entry and Exit and Aggregate Growth (2023)
Working Paper: Firm Entry and Exit and Aggregate Growth (2021)
Working Paper: Firm Entry and Exit and Aggregate Growth (2020)
Working Paper: Firm Entry and Exit and Aggregate Growth (2018)
Working Paper: Firm Entry and Exit and Aggregate Growth (2017)
Working Paper: Firm Entry and Exit and Aggregate Growth (2016)
Working Paper: Firm Entry and Exit and Aggregate Growth (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:544

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