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Who killed business dynamism in the U.S.?

Bianca Barbaro, Giorgio Massari and Patrizio Tirelli

No 494, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: We offer a new interpretation of the long-term dynamics in the U.S. firm entry rate. Its decline was the consequence of a persistent combination of adverse (favorable) productivity shocks to potential entrants(incumbents), while the long-term increase in price markups did not play a significant role. In spite of the "Schumpeterian" structure of our model, not all recessions had a "cleansing" effect, because the combination of shocks associated to the specific episodes had markedly different effects on the dispersion of firms' efficiency. Finally, the extensive margin allows to rationalize the procyclical pattern of TFP growth and its long-term decline.

Keywords: firm entry rate; endogenous firm dynamics; productivity; business cycle; Bayesian estimation; DSGE. (search for similar items in EconPapers)
JEL-codes: C11 E20 E30 E32 (search for similar items in EconPapers)
Pages: 63
Date: 2022-03, Revised 2022-08
New Economics Papers: this item is included in nep-dge
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