EconPapers    
Economics at your fingertips  
 

Cyclical net entry and exit

Joshua Bernstein, Alexander W. Richter and Nathaniel Throckmorton

European Economic Review, 2021, vol. 136, issue C

Abstract: This paper examines how the interplay between cyclical net entry and exit of firms and search and matching frictions affect business cycle dynamics. We show cyclical net entry and exit reallocates inputs across firms and destroys jobs in recessions, which amplifies and skews business cycle dynamics. The model matches the volatility and skewness of real activity, the fast rise and slow decline in unemployment that occurs in recessions, and the counter-cyclical variation in macroeconomic uncertainty. Cyclical net entry and exit generates a 20% increase in volatility, 40% increase in skewness, and 55% increase in the welfare cost of business cycles.

Keywords: Firm entry; Firm exit; Unemployment; Nonlinear; Skewness; Welfare; Uncertainty (search for similar items in EconPapers)
JEL-codes: E24 E32 E37 J63 L11 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292121001057
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:136:y:2021:i:c:s0014292121001057

DOI: 10.1016/j.euroecorev.2021.103752

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2021-09-29
Handle: RePEc:eee:eecrev:v:136:y:2021:i:c:s0014292121001057