The Impact of Business Cycle Conditions on Firm Dynamics and Composition

Cihan Artunç

The Journal of Economic History, 2023, vol. 83, issue 2, 398-430

Abstract: This paper estimates the causal impact of short-term aggregate fluctuations in Egypt, 1911–48, using global cotton price shocks. Firm entry was procyclical, and exit was acyclical. There were persistent differences between cohorts over the cycle; expansionary cohorts were of lower quality. The evidence supports models of firm entry with ex-ante heterogeneity. The findings highlight the extensive margin of entry as the primary adjustment mechanism. As a result, recessions had a strong “isolation” effect. This nature of firm entry amplified and propagated temporary price shocks.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jechis:v:83:y:2023:i:2:p:398-430_3

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