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A La Recherche des Moments Perdus: Covariance Models for Unbalanced Panels with Endogenous Death

  • John M. Abowd
  • Bruno Crepon
  • Francis Kramarz
  • Alain Trognon

We develop a model for decomposing the covariance structure of panel data on firms into a part due to permanent heterogeneity, a part due to differential histories with unknown ages, and a part due to the evolution of economic shocks to the firm. Our model allows for the endogenous death of firms and correctly handles the problems arising from the estimation of this death process. We implement this model on an unbalanced longitudinal sample of French firms which have both known and unknown ages and histories. For firms with unknown birthdates, we find that the structural autocorrelation in employment, compensation and capital is dominated by the part due to initial heterogeneity and random growth rates. Serial correlation in the periodic shocks is less important. For these firms, profitability, value-added and indebtedness have processes in which the heterogeneity components are less important. Firms with known birthdates and histories (which are younger than the censored firms) have autocorrelation structures dominated by the heterogeneity.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0180.

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Date of creation: May 1995
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Handle: RePEc:nbr:nberte:0180
Note: LS PR
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  1. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "Plant Turnover and Gross Employment Flows in the U.S. Manufacturing Sector," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 48-71, January.
  2. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
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