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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 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 annualized growth of measured aggregate productivity of 0.22%, one-quarter of the productivity growth in the data. Further accounting for time changes in the share of nonemployer firms and in the distribution of employment across firms, we find that productivity growth is even higher (0.47% per year). The productivity growth slowdown is not due to changes in net firm entry.

Keywords: nonemployers; employer firms; business dynamism; productivity; TFP. (search for similar items in EconPapers)
JEL-codes: E1 O4 O51 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2022-10-28
New Economics Papers: this item is included in nep-bec, 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 (2021) Downloads
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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