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Job Creation and Firm Dynamics in the United States

  • John Haltiwanger

Executive SummaryBusiness dynamism plays an important role in job creation and productivity growth in the United States. Business start-ups are an important contributor to that dynamism. Start-ups contribute disproportionately to job creation but are very heterogeneous in terms of productivity. The subsequent “up-or-out” dynamic of young businesses is an important source of job and productivity growth: exiting young businesses are of very low productivity, and the surviving young businesses exhibit rapid growth with above average productivity. The United States shows signs of becoming less dynamic over time—exhibiting a slower pace of reallocation with an accompanying slower pace of job creation from business start-ups. The recent recession saw the lowest overall rate of gross job creation and job creation from start-ups since at least 1980. Job creation for small (young) businesses took an especially large hit in the recession and has been very slow to recover. An open question is whether the observed decline in dynamism exhibited by U.S. businesses will have adverse consequences for U.S. innovation, job, and productivity growth in the future.The fundamental impulse that keeps the capital engine in motion comes from the new consumers’ goods, the new methods of production and transportation, the new markets…. [The process] incessantly revolutionizes from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact of capitalism.Joseph Schumpeter

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File URL: http://www.jstor.org/stable/full/10.1086/663154
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Article provided by University of Chicago Press in its journal Innovation Policy and the Economy.

Volume (Year): 12 (2012)
Issue (Month): 1 ()
Pages: 17 - 38

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Handle: RePEc:ucp:ipolec:doi:10.1086/663154
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  1. Richard Rogerson & Diego Restuccia, 2004. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," 2004 Meeting Papers 69, Society for Economic Dynamics.
  2. Steven J. Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2007. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," NBER Chapters, in: NBER Macroeconomics Annual 2006, Volume 21, pages 107-180 National Bureau of Economic Research, Inc.
  3. John C. Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," NBER Working Papers 16300, National Bureau of Economic Research, Inc.
  4. Chang-Tai Hsieh & Peter Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," Working Papers 09-04, Center for Economic Studies, U.S. Census Bureau.
  5. Eric Bartelsman & John Haltiwanger & Stefano Scarpetta, 2013. "Cross-Country Differences in Productivity: The Role of Allocation and Selection," American Economic Review, American Economic Association, vol. 103(1), pages 305-34, February.
  6. Steven J. Davis & R. Jason Faberman & John C. Haltiwanger, 2009. "The establishment-level behavior of vacancies and hiring," Working Papers 09-14, Federal Reserve Bank of Philadelphia.
  7. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
  8. Lucia Foster & John Haltiwanger & C. J. Krizan, 2006. "Market Selection, Reallocation, and Restructuring in the U.S. Retail Trade Sector in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 748-758, November.
  9. Chad Syverson, 2004. "Product Substitutability and Productivity Dispersion," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 534-550, May.
  10. John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau.
  11. Steven J. Davis & Jason Faberman & John C. Haltiwanger, 2011. "Labor Market Flows in the Cross Section and Over Time," NBER Working Papers 17294, National Bureau of Economic Research, Inc.
  12. Steven J. Davis & R. Jason Faberman & John Haltiwanger & Ron Jarmin & Javier Miranda, 2010. "Business Volatility, Job Destruction, and Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 259-87, April.
  13. Hulten, Charles R. & Dean, Edwin R. & Harper, Michael (ed.), 2001. "New Developments in Productivity Analysis," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226360621.
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