Firm Entry and Exit and Aggregate Growth

Jose Asturias, Sewon Hur, Timothy Kehoe and Kim Ruhl

No 19-03R, Working Papers from Federal Reserve Bank of Cleveland

Abstract: Applying the Foster, Haltiwanger, and Krizan (FHK) (2001) decomposition to plant-level manufacturing data from Chile and Korea, we find that the entry and exit of plants account for a larger fraction of aggregate productivity growth during periods of fast GDP growth. Studies of other countries confirm this empirical relationship. To analyze this relationship, we develop a simple model of firm entry and exit based on Hopenhayn (1992) in which there are analytical expressions for the FHK decomposition. When we introduce reforms that reduce entry costs or reduce barriers to technology adoption into a calibrated model, we find that the entry and exit terms in the FHK decomposition become more important as GDP grows rapidly, just as they do in the data from Chile and Korea.

Keywords: Entry costs; Entry; Exit; Barriers to technology adoption; Productivity (search for similar items in EconPapers)
JEL-codes: E22 O10 O38 O47 (search for similar items in EconPapers)
Pages: 95 pages
Date: 2019-02-01, Revised 2020-06-16
New Economics Papers: this item is included in nep-bec, nep-ent, nep-gro, nep-lam, nep-mac, nep-sbm and nep-tid
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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 (2018)
Working Paper: Firm Entry and Exit and Aggregate Growth (2017)
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:fedcwq:190300

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DOI: 10.26509/frbc-wp-201903r

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