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The Role of Nonemployers in Business Dynamism and Aggregate Productivity

Pedro Bento and Diego Restuccia ()

Working Papers from University of Toronto, Department of Economics

Abstract: The well-documented decline in business dynamism, measured in the literature by the net entry rate of employer firms, has been proposed as an explanation for the productivity growth slowdown in the United States. We assess the role of nonemployers, firms without paid employees, in business dynamism and aggregate productivity. Including nonemployers, the total number of firms has instead increased since the early 1980s, which in the context of a standard model of firm dynamics implies an average annual growth of aggregate productivity of 0.26%, one-quarter of the productivity growth in the data. Accounting for changes in the share of nonemployers and the firm size distribution over time, the increase in the total number of businesses implies an even higher productivity growth of 0.52% annually. The productivity growth slowdown is not due to changes in business dynamism.

Keywords: nonemployers; employer firms; business dynamism; productivity; TFP. (search for similar items in EconPapers)
JEL-codes: O4 O51 E1 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2021-01-19
New Economics Papers: this item is included in nep-bec, nep-dge, nep-eff, nep-ent and nep-sbm
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Related works:
Working Paper: The Role of Nonemployers in Business Dynamism and Aggregate Productivity (2020) Downloads
Working Paper: The Role of Nonemployers in Business Dynamism and Aggregate Productivity (2019) Downloads
Working Paper: The Role of Nonemployers in Business Dynamism and Aggregate Productivity (2019) Downloads
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