Firm Entry and Exit and Aggregate Growth / Jose Asturias, Sewon Hur, Timothy J. Kehoe, Kim J. Ruhl.

Format:

Book

Author/Creator:

Asturias, Jose.

Contributor:

National Bureau of Economic Research.

Hur, Sewon.

Kehoe, Timothy J.

Ruhl, Kim J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23202.

NBER working paper series no. w23202

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

Using data from Chile and Korea, we find that a larger fraction of aggregate productivity growth is due to firm entry and exit during fast-growth episodes compared to slow-growth episodes. Studies of other countries confirm this empirical relationship. We develop a model of endogenous firm entry and exit based on Hopenhayn (1992). Firms enter with efficiencies drawn from a distribution whose mean grows over time. After entering, a firm's efficiency grows with age. In the calibrated model, reducing entry costs or barriers to technology adoption generates the pattern we document in the data. Firm turnover is crucial for rapid productivity growth.

Notes:

Print version record

February 2017.