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Value without Employment

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  • SIMCHA BARKAI
  • STAVROS PANAGEAS

Abstract

Young firms' contribution to aggregate employment has been underwhelming. We show that a similar trend is not apparent, however, in their contribution to aggregate sales or stock market capitalization, implying that these firms have exhibited a high average‐to‐marginal revenue product of labor. We study the implications of a gradual shift in the average‐to‐marginal revenue product of labor within a model of dynamic firm heterogeneity. We show that this shift provides (i) a unified explanation for several aspects of the decline in dynamism and (ii) a possible explanation for why large declines in young‐firm employment may have only a moderate effect on aggregate output and consumption.

Suggested Citation

  • Simcha Barkai & Stavros Panageas, 2025. "Value without Employment," Journal of Finance, American Finance Association, vol. 80(6), pages 3725-3770, December.
    • Handle: RePEc:bla:jfinan:v:80:y:2025:i:6:p:3725-3770
    DOI: 10.1111/jofi.13505
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