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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 in the literature by the net entry rate of employer firms, has been proposed as an explanation for the productivity growth slow-down 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 average annual growth of aggregate productivity of 0.26%, one-quarter of the productivity growth in the data. Accounting for changes in the share of nonemployers and the firm size distribution over time, the increase in the total number of businesses implies an even higher productivity growth of 0.52% annually. The productivity growth slowdown is not due to changes in business dynamism.

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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    References listed on IDEAS

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    2. 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.

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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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