Grown-up Business Cycles
Aysegul Sahin () and
Benjamin Pugsley ()
No 655, 2015 Meeting Papers from Society for Economic Dynamics
Abstract We document two striking facts about U.S. firm dynamics and interpret their significance for aggregate employment dynamics. The first observation is the steady decline in the firm entry rate over the last thirty years, and the second is the gradual shift of employment from younger to older firms over the same period. Both hold across industries and geography. We show that despite these trends, firms' lifecycle dynamics and their business cycle properties have remained virtually unchanged. Consequently, the reallocation of employment towards older firms results entirely from the cumulative effect of the 30-year decline in firm entry. This 'startup deficit' has both an immediate and a delayed (by shifting the age distribution) effect on aggregate employment dynamics. Recognizing this evolving heterogeneity is crucial for understanding shifts in aggregate behavior of employment over the business cycle. With mature firms less responsive to business cycle shocks, the cyclical component of aggregate employment growth diminishes with the increasing share of mature firms. At the same time, the trend decline in firm entry masks the diminishing cyclicality in contractions and reinforces it during expansions, which generates the appearance of jobless recoveries where aggregate employment recovers slowly relative to output.
New Economics Papers: this item is included in nep-bec, nep-ent and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (15) Track citations by RSS feed
Downloads: (external link)
Working Paper: Grown-Up Business Cycles (2015)
Working Paper: Grown-up business cycles (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:655
Access Statistics for this paper
More papers in 2015 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().