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Big Business Stability and Economic Growth: Is What's Good for General Motors Good for America?

  • Kathy Fogel
  • Randall Morck
  • Bernard Yeung

What is good for big business need not generally advance a country%u2019s overall economy. Big business turnover correlates with rising income, productivity, and (in high income countries) faster capital accumulation; consistent with Schumpeter%u2019s (1912) creative destruction and recent formalizations like Aghion and Howitt (1992). Turnover appears to %u201Ccause%u201D growth; and disappearing behemoths, more than rising stars, drive our results. Stronger findings suggest more intense creative destruction in countries with higher incomes, as well as those with smaller governments, Common Law courts, smaller banking systems, stronger shareholder rights, and more open economies. Only the last matters more in lower income countries.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12394.

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Date of creation: Jul 2006
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Publication status: published as Fogel, Kathy & Morck, Randall & Yeung, Bernard, 2008. "Big business stability and economic growth: Is what's good for General Motors good for America?," Journal of Financial Economics, Elsevier, vol. 89(1), pages 83-108, July.
Handle: RePEc:nbr:nberwo:12394
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