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The Dynamic Adjustment Process of Firm Entry and Exit in Manufacturing and Finance, Insurance, and Real Estate

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  • Troske, Kenneth R

Abstract

This article examines the dynamic adjustment process of firm entry and exit in manufacturing and finance, insurance, and real estate (FIRE). The object is to extend our knowledge of firm dynamics to include firm exit as well as nonmanufacturing firms. This interindustry comparison of firm dynamics uses a unique longitudinal firm-level data set containing over 13,000 firms. I report three main findings. First, in both industries firm entry is characterized by a decline in the first two moments of the growth rate distributions and by a rise in the first two moments of the relative firm size distribution as firms age. Second, in both industries firm exit is characterized by falling mean growth rates and mean relative firm size for a number of periods prior to exit. Third, relative to FIRE, firm entry and exit in manufacturing is a longer process and involves larger adjustments in relative firm size. Copyright 1996 by the University of Chicago.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Law & Economics.

Volume (Year): 39 (1996)
Issue (Month): 2 (October)
Pages: 705-35

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Handle: RePEc:ucp:jlawec:v:39:y:1996:i:2:p:705-35

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Web page: http://www.journals.uchicago.edu/JLE/

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Cited by:
  1. Daunfeldt , Sven-Olov & Rudholm, Niklas & Bergström, Fredrik, 2002. "Entry into Swedish Retail- and Wholesale Trade Markets," UmeÃ¥ Economic Studies 599, Umeå University, Department of Economics.
  2. Carlos Carreira & Paulino Teixeira, 2009. "The Shadow of Death: Analysing the Pre-Exit Productivity of Portuguese Manufacturing Firms," GEMF Working Papers 2008-05, GEMF - Faculdade de Economia, Universidade de Coimbra.
  3. Fajnzylber, Pablo & Maloney, William F. & Ribeiro, Eduardo, 2001. "Firm entry and exit, labor demand, and trade reform : evidence from Chile and Colombia," Policy Research Working Paper Series 2659, The World Bank.
  4. Daniel Fackler & Claus Schnabel & Joachim Wagner, 2012. "Lingering illness or sudden death? Pre-exit employment developments in German establishments," Working Paper Series in Economics 258, University of Lüneburg, Institute of Economics.
  5. Kosová, Renáta & Lafontaine, Francine, 2012. "Much ado about chains: A research agenda," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 303-308.
  6. Gian Luca Clementi & Hugo Hopenhayn, . "A Theory of Financing Constraints and Firm Dynamics," GSIA Working Papers 2002-E9, Carnegie Mellon University, Tepper School of Business.
  7. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2011. "The Effect of Newspaper Entry and Exit on Electoral Politics," American Economic Review, American Economic Association, vol. 101(7), pages 2980-3018, December.
  8. Frech, Ted, 2002. "Corporate Demography and Empirical Industrial Organization: A Critical Appraisal," University of California at Santa Barbara, Economics Working Paper Series qt451647b2, Department of Economics, UC Santa Barbara.
  9. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2009. "The Effect of Newspaper Entry and Exit on Electoral Politics," NBER Working Papers 15544, National Bureau of Economic Research, Inc.
  10. Scott Schuh & Robert K Triest, 1998. "Job Reallocation And The Business Cycle: New Facts An Old Debate," Working Papers 98-11, Center for Economic Studies, U.S. Census Bureau.
  11. Mathias Erlei & Jens-Peter Springmann, 2006. "Small is Successful!?," TUC Working Papers in Economics 0005, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
  12. Carrington, William J. & Fallick, Bruce C., 2014. "Why Do Earnings Fall with Job Displacement?," Working Paper 1405, Federal Reserve Bank of Cleveland.
  13. Scott Schuh & Robert K. Triest, 1998. "Job reallocation and the business cycle: new facts for an old debate," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 42(Jun), pages 271-357.
  14. Dunne, Timothy & Merrell, David R., 2001. "Gross employment flows in U.S. coal mining," Economics Letters, Elsevier, vol. 71(2), pages 217-224, May.
  15. Fan, Terence Ping Ching & Tan, Alex Tai Loong & Geng, Xuesong, 2014. "Rapid capacity expansions and failure: A trap for new airline entrants?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 61(C), pages 176-191.
  16. Prantl, Susanne, 2003. "Bankruptcy and Voluntary Liquidation: Evidence for New Firms in East and West Germany after Unification," ZEW Discussion Papers 03-72, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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