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Firm Dynamics, Persistent Effects of Entry Conditions, and Business Cycles

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  • Sara Moreira

Abstract

This paper examines how the state of the economy when businesses begin operations affects their size and performance over the lifecycle. Using micro-level data that covers the entire universe of businesses operating in the U.S. since the late 1970s, I provide new evidence that businesses born in downturns start on a smaller scale and remain smaller over their entire lifecycle. In fact, I find no evidence that these differences attenuate even long after entry. Using new data on the productivity and composition of startup businesses, I show that this persistence is related to selection at entry and demand-side channels.

Suggested Citation

  • Sara Moreira, 2017. "Firm Dynamics, Persistent Effects of Entry Conditions, and Business Cycles," Working Papers 17-29, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:17-29
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    File URL: https://www2.census.gov/ces/wp/2017/CES-WP-17-29.pdf
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    Cited by:

    1. Bento Pedro & Ranasinghe Ashantha, 2025. "Financial Frictions at Entry, Average Firm Size, and Productivity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 25(1), pages 81-120.
    2. Enisse Kharroubi, 2022. "Growth expectations and the dynamics of firm entry," BIS Working Papers 1036, Bank for International Settlements.
    3. Cavallari, Lilia & Romano, Simone & Naticchioni, Paolo, 2021. "The original sin: Firms’ dynamics and the life-cycle consequences of economic conditions at birth," European Economic Review, Elsevier, vol. 138(C).
    4. Stephen Millard & Anamaria Nicolae & Michael Nower, 2019. "International trade, non-trading firms and their impact on labour productivity," Bank of England working papers 787, Bank of England.
    5. Mattia Di Ubaldo & Iulia Siedschlag, 2021. "Investment in Knowledge‐Based Capital and Productivity: Firm‐Level Evidence from a Small Open Economy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 363-393, June.
    6. Ryan A. Decker & Meagan McCollum & Gregory B. Upton Jr., 2024. "Boom Town Business Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 59(2), pages 627-651.
    7. Lynda Sanderson, 2024. "Born in bad times: Economic conditions, selection and employment," Working Papers 2024/01, New Zealand Productivity Commission.
    8. Mina, Andrea & Santoleri, Pietro, 2021. "The effect of the Great Recession on the employment growth of young vs. small firms in the Eurozone," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 184-194.
    9. Ammar Farooq & Adriana D. Kugler & Umberto Muratori, 2020. "Do Unemployment Insurance Benefits Improve Match and Employer Quality? Evidence from Recent U.S. Recessions," NBER Working Papers 27574, National Bureau of Economic Research, Inc.
    10. Joonkyu Choi, 2018. "Entrepreneurial Risk-Taking, Young Firm Dynamics, and Aggregate Implications," 2018 Meeting Papers 1018, Society for Economic Dynamics.
    11. Aubhik Khan & Julia Thomas & Tatsuro Senga, 2019. "Business Formation and Economic Growth Beyond the Great Recession," 2019 Meeting Papers 1453, Society for Economic Dynamics.
    12. E. Mark Curtis & Ryan A. Decker, 2018. "Entrepreneurship and State Taxation," Finance and Economics Discussion Series 2018-003, Board of Governors of the Federal Reserve System (U.S.).
    13. Sebastian Doerr, 2019. "Unintended side effects: stress tests, entrepreneurship, and innovation," BIS Working Papers 823, Bank for International Settlements.
    14. Aubhik Khan & Julia Thomas & Tatsuro Senga, 2018. "The Persistent Effects of Entry and Exit," 2018 Meeting Papers 707, Society for Economic Dynamics.

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