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The Role of Nonemployers in Business Dynamism and Aggregate Productivity

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  • Pedro Bento
  • Diego Restuccia

Abstract

The well-documented decline in business dynamism, measured by the net entry rate of employer firms, has been proposed as an explanation for the productivity growth slowdown in the United States. We assess the role of nonemployers, firms without paid employees, in business dynamism and aggregate productivity. Including nonemployers, the total number of firms has instead increased since the early 1980s, which in the context of a standard model of firm dynamics implies an annualized growth of measured aggregate productivity of 0.22%, one-quarter of the productivity growth in the data. Further accounting for time changes in the share of nonemployer firms and in the distribution of employment across firms, we find that productivity growth is even higher (0.47% per year). The productivity growth slowdown is not due to changes in net firm entry.

Suggested Citation

  • Pedro Bento & Diego Restuccia, 2019. "The Role of Nonemployers in Business Dynamism and Aggregate Productivity," NBER Working Papers 25998, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25998
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    Cited by:

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    2. Pedro Bento, 2021. "Trade without “scale effects”," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(3), pages 1252-1274, November.
    3. Pedro Bento, 2020. "Female Entrepreneurship in the U.S. 1982 - 2012: Implications for Welfare and Aggregate Output," Working Papers 20201201-001, Texas A&M University, Department of Economics.
    4. Innessa Colaiacovo & Margaret Dalton & Sari Pekkala Kerr & William R. Kerr, 2022. "The Transformation of Self Employment," Working Papers 22-03, Center for Economic Studies, U.S. Census Bureau.

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    More about this item

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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