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Who Quits Next? Firm Growth In Growing Economies

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  • Julieta Caunedo
  • Emircan Yurdagul

Abstract

We document novel facts about the relationship between aggregate growth and firm dynamics using a large set of countries. We argue that firm employment patterns are not necessarily informative about cross‐country differences in aggregate growth because they are induced by changes in the productivity of a firm relative to others. In contrast, aggregate growth is linked to average firm‐level productivity growth and firm age. We formalize this intuition through a tractable model of endogenous aggregate growth and firm dynamics where firms realize positive returns to investment with some probability. We find that cross‐country disparities in this probability can account for two‐thirds of the variation in aggregate growth. (JEL D21, D22, E23, O4)

Suggested Citation

  • Julieta Caunedo & Emircan Yurdagul, 2019. "Who Quits Next? Firm Growth In Growing Economies," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 33-49, January.
    • Handle: RePEc:bla:ecinqu:v:57:y:2019:i:1:p:33-49
    DOI: 10.1111/ecin.12722
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    1. Amaia Iza, 2016. "Entrepreneurial skills, technological progress and firm growth," EcoMod2016 9469, EcoMod.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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