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The Nature of Firm Growth

Author

Listed:
  • Petr Sedlacek

    (Bonn University)

  • Benjamin Pugsley

    (Federal Reserve Bank of NY)

  • Vincent Sterk

    (University College London)

Abstract

There are vast differences in the growth patterns of firms: high-growth, young businesses, or “gazelles”, account for the vast majority of employment growth at incumbent firms. Using a large administrative panel data set for the United States, we provide evidence that ex-ante differences in the growth potential of firms account for most of the size heterogeneity across firms of a given age. First, we estimate a reduced-form employment process, allowing for heterogeneity in steady-state levels and deriving parameter identification from the autocovariance function of employment. Next, we estimate a general equilibrium firm dynamics model and explore the implications for firm selection and the macro effects of firm-level distortions.

Suggested Citation

  • Petr Sedlacek & Benjamin Pugsley & Vincent Sterk, 2017. "The Nature of Firm Growth," 2017 Meeting Papers 196, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:196
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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