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How Firms Respond to Business Cycles: The Role of Firm Age and Firm Size

  • Teresa C. Fort
  • John Haltiwanger
  • Ron S. Jarmin
  • Javier Miranda

There remains considerable debate in the theoretical and empirical literature about the differences in the cyclical dynamics of firms by firm size. This paper contributes to the debate in two ways. First, the key distinction between firm size and firm age is introduced. The evidence presented in this paper shows that young businesses (that are typically small) exhibit very different cyclical dynamics than small/older businesses. The second contribution is to present evidence and explore explanations for the finding that young/small businesses were hit especially hard in the Great Recession. The collapse in housing prices accounts for a significant part of the large decline of young/small businesses in the Great Recession.

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File URL: ftp://ftp2.census.gov/ces/wp/2013/CES-WP-13-30.pdf
File Function: First version, 2013
Download Restriction: no

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 13-30.

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Length: 77 pages
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:cen:wpaper:13-30
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  1. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," Working Papers 10-17, Center for Economic Studies, U.S. Census Bureau.
  2. Simon Gilchrist & Vladimir Yankov & Egon Zakrajsek, 2009. "Credit Market Shocks and Economic Fluctuations: Evidence from Corporate Bond and Stock Markets," NBER Working Papers 14863, National Bureau of Economic Research, Inc.
  3. Stephen Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded Versus Privately Held Firms," Working Papers 06-17, Center for Economic Studies, U.S. Census Bureau.
  4. John Haltiwanger & Chad Syverson & Lucia Foster, 2010. "The Slow Growth of New Plants: Learning about Demand?," 2010 Meeting Papers 106, Society for Economic Dynamics.
  5. James H. Stock & Mark W.Watson, 2003. "Forecasting Output and Inflation: The Role of Asset Prices," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 788-829, September.
  6. Fabien Postel-Vinay & Giuseppe Moscarini, 2008. "The Timing of Labor Market Expansions: New Facts and a New Hypothesis," 2008 Meeting Papers 326, Society for Economic Dynamics.
  7. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  8. Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series 2000-19, Board of Governors of the Federal Reserve System (U.S.).
  9. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-65, June.
  10. Atif R. Mian & Amir Sufi, 2009. "House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis," NBER Working Papers 15283, National Bureau of Economic Research, Inc.
  11. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1253-1296, August.
  12. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  13. Steven A. Sharpe, 1993. "Financial market imperfections, firm leverage and the cyclicality of employment," Finance and Economics Discussion Series 93-10, Board of Governors of the Federal Reserve System (U.S.).
  14. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau.
  15. Howitt, Peter & Aghion, Philippe, 2006. "Appropriate Growth Policy: A Unifying Framework," Scholarly Articles 4554121, Harvard University Department of Economics.
  16. Randy Becker & John Haltiwanger & Ron Jarmin & Shawn Klimek & Dan Wilson, 2005. "Micro and Macro Data Integration: The Case of Capital," Working Papers 05-02, Center for Economic Studies, U.S. Census Bureau.
  17. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  18. Erik Hurst & Benjamin Wild Pugsley, 2011. "What do Small Businesses Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 73-142.
  19. Manuel Adelino & Antoinette Schoar & Felipe Severino, 2013. "House Prices, Collateral and Self-Employment," NBER Working Papers 18868, National Bureau of Economic Research, Inc.
  20. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  21. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
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