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Limited Re-Entry and Business Cycles

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  • Patrick Macnamara

Abstract

This paper builds a model of firm dynamics to study the consequences of "limited re-entry" for macroeconomic dynamics. Matched individual-level data from the Current Population Survey indicate that only 8% of unemployed chief executives, on average, find employment again as a chief executive after 12 months. Given the close link between entrepreneurs and chief executives, this suggests that it is very difficult for exiting entrepreneurs to "re-enter" in the future. The model, calibrated to match this observation, indicates that "limited re-entry" has made business cycles more volatile and persistent.

Suggested Citation

  • Patrick Macnamara, 2014. "Limited Re-Entry and Business Cycles," Centre for Growth and Business Cycle Research Discussion Paper Series 194, Economics, The University of Manchester.
    • Handle: RePEc:man:cgbcrp:194
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    1. Benjamin Hemingway, 2020. "Macroeconomic implications of insolvency regimes," Bank of Lithuania Working Paper Series 77, Bank of Lithuania.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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