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Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology

Filippo Biondi, Sergio Inferrera, Matthias Mertens and Javier Miranda
Additional contact information
Filippo Biondi: KU Leuven and Research Foundation Flanders (FWO)
Sergio Inferrera: Queen Mary University of London

No 2023-011, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: We study the changing patterns of business dynamism in Europe after 2000 using novel micro-aggregated data that we collect for 19 European countries. In all of them, we document a decline in job reallocation rates that concerns most economic sectors. This is mainly driven by dynamics within sectors, size classes, and age classes rather than by compositional changes. Large and mature firms show the strongest decline in job reallocation rates. Simultaneously, the shares of employment and sales of young firms decline. Consistent with US evidence, firms’ employment changes have become less responsive to productivity. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive a firm-level framework that relates changes in firms’ productivity, market power, and technology to job reallocation and firms’ responsiveness.

Keywords: Business dynamism; productivity; responsiveness of labor demand; market power; European cross-country data; technological change (search for similar items in EconPapers)
JEL-codes: D24 J21 J23 J42 L11 L25 (search for similar items in EconPapers)
Date: 2023-09-25
New Economics Papers: this item is included in nep-bec, nep-com, nep-eff, nep-ent, nep-ger, nep-ifn, nep-lma and nep-tid
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Related works:
Working Paper: Declining business dynamism in Europe: The role of shocks, market power, and technology (2024) Downloads
Working Paper: Declining business dynamism in Europe: The role of shocks, market power, and technology (2024) Downloads
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