The Declining Average Size of Establishments: Evidence and Explanations
AbstractThe average size of establishments rose through the expansion of the 1990s, and then fell slightly during the expansion of the 2000s. In this paper, we seek to understand the change in trend in the average size of establishments during the last two decades. We begin with an exploration of the robustness of the basic empirical facts. Both Business Employment Dynamics statistics from the Bureau of Labor Statistics and Business Dynamics Statistics from the Census Bureau show that the average size of businesses – both establishments and firms – is growing slower in the 2000s than in the 1990s. The Census Bureau data also show the trends of average size in the 1990s are similar to the trends from the late 1970s and the 1980s. Our empirical analysis results in two main conclusions. First, the change in trend of the average size of establishments occurs in almost all industries, and our decomposition shows that the sizeable shifts in industry composition that occurred in the U.S. economy during the past two decades account for only about half of the downward trend during the 2000s expansion. Second, we find that the decrease in the average size of establishments during the 2000s expansion can be explained by the age of establishments. Specifically, we find that establishment births are starting smaller and staying smaller.
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Bibliographic InfoPaper provided by U.S. Bureau of Labor Statistics in its series Working Papers with number 452.
Length: 30 pages
Date of creation: Feb 2012
Date of revision:
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More information through EDIRC
Establishment Size; Industry Decompoition; Establishment Births;
Find related papers by JEL classification:
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-14 (All new papers)
- NEP-BEC-2012-03-14 (Business Economics)
- NEP-HME-2012-03-14 (Heterodox Microeconomics)
- NEP-LMA-2012-03-14 (Labor Markets - Supply, Demand, & Wages)
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- Serguey Braguinsky & Lee G. Branstetter & Andre Regateiro, 2011. "The Incredible Shrinking Portuguese Firm," NBER Working Papers 17265, National Bureau of Economic Research, Inc.
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