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A Structural Empirical Model of Firm Growth, Learning, and Survival

  • Jaap H. Abbring
  • Jeffrey R. Campbell

We present a structural model of firm growth, learning, and survival and consider its identification and estimation. In the model, entrepreneurs have private and possibly error-ridden observations of persistent and transitory shocks to profit. We demonstrate that the model's parameters can be recovered from public observations of sales and survival, and we estimate them using monthly data from new bars in Texas. We find that entrepreneurs observe profit's persistent component without error. In this sense, their information is substantially superior to the public's.

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File URL: http://www.nber.org/papers/w9712.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9712.

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Date of creation: May 2003
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Handle: RePEc:nbr:nberwo:9712
Note: EFG IO
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  1. Jeffrey R. Campbell & Hugo A. Hopenhayn, 2002. "Market Size Matters," NBER Working Papers 9113, National Bureau of Economic Research, Inc.
  2. Taber, Christopher R., 2000. "Semiparametric identification and heterogeneity in discrete choice dynamic programming models," Journal of Econometrics, Elsevier, vol. 96(2), pages 201-229, June.
  3. Holmes, Thomas J & Schmitz, James A, Jr, 1995. "On the Turnover of Business Firms and Business Managers," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1005-38, October.
  4. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
  5. Fishman, Arthur & Rob, Rafael, 2003. "Consumer inertia, firm growth and industry dynamics," Journal of Economic Theory, Elsevier, vol. 109(1), pages 24-38, March.
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