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Author: Vasco M. Carvalho Publisher: ISBN: Category : Business cycles Languages : en Pages : 0
Book Description
Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks. We offer a complete analytical characterization of the law of motion of the aggregate state in this class of models -- the firm size distribution -- and show that the resulting closed form solutions for aggregate output and productivity dynamics display: (i) persistence, (ii) volatility and (iii) time-varying second moments. We explore the key role of moments of the firm size distribution -- and, in particular, the role of large firm dynamics -- in shaping aggregate fluctuations, theoretically, quantitatively and in the data.
Author: Vasco M. Carvalho Publisher: ISBN: Category : Business cycles Languages : en Pages : 0
Book Description
Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks. We offer a complete analytical characterization of the law of motion of the aggregate state in this class of models -- the firm size distribution -- and show that the resulting closed form solutions for aggregate output and productivity dynamics display: (i) persistence, (ii) volatility and (iii) time-varying second moments. We explore the key role of moments of the firm size distribution -- and, in particular, the role of large firm dynamics -- in shaping aggregate fluctuations, theoretically, quantitatively and in the data.
Author: João Ayres Publisher: ISBN: Category : Languages : en Pages :
Book Description
We use firm dynamics statistics on employment by age, entry, exit, and job flows to identify sources of business cycle fluctuations in the U.S. economy since 1980. We extend the Hopenhayn (1992) firm dynamics model by incorporating capital and debt accumulation to the firm's problem and savings to the consumer's problem. Analyzing the implications of unexpected productivity, credit, labor wedge, and investment wedge shocks for firm dynamics statistics, we show that (a) productivity shock accounts for the 1990-91 and 2001 recessions, and (b) productivity and credit shocks jointly account for the 1980-82 and 2007-09 recessions.
Author: Teresa C. Fort Publisher: ISBN: Category : Economics Languages : en Pages : 0
Book Description
There remains considerable debate in both the theoretical and empirical literature about the differences in the cyclical dynamics of firms by firm size. Some have hypothesized that small firms are more sensitive to cycles while others have posited that larger firms are more sensitive. Researchers have found evidence supportive of both hypotheses -using different cyclical indicators and focusing on different underlying shocks. This paper contributes to the debate in two ways. First, the key distinction between firm size and firm age is introduced. The evidence presented in this paper shows that young businesses (that are typically small) exhibit very different cyclical dynamics than small/older businesses. Young/small businesses are more sensitive to the cycle than older/larger businesses. Evidence about the difference in the cyclical dynamics between small/older and large/older businesses is mixed. The second contribution is to present evidence and explore explanations for the finding that young/small businesses were hit especially hard in the Great Recession. The collapse in housing prices accounts for a significant part of the large decline of young/small businesses in the Great Recession. The decline was especially pronounced in states with a large decline in housing prices. This pattern holds even after controlling, through a panel VAR, for national and local business cycle conditions.
Author: Andrea Ciani Publisher: World Bank Publications ISBN: 1464815585 Category : Business & Economics Languages : en Pages : 178
Book Description
Economic and social progress requires a diverse ecosystem of firms that play complementary roles. Making It Big: Why Developing Countries Need More Large Firms constitutes one of the most up-to-date assessments of how large firms are created in low- and middle-income countries and their role in development. It argues that large firms advance a range of development objectives in ways that other firms do not: large firms are more likely to innovate, export, and offer training and are more likely to adopt international standards of quality, among other contributions. Their particularities are closely associated with productivity advantages and translate into improved outcomes not only for their owners but also for their workers and for smaller enterprises in their value chains. The challenge for economic development, however, is that production does not reach economic scale in low- and middle-income countries. Why are large firms scarcer in developing countries? Drawing on a rare set of data from public and private sources, as well as proprietary data from the International Finance Corporation and case studies, this book shows that large firms are often born large—or with the attributes of largeness. In other words, what is distinct about them is often in place from day one of their operations. To fill the “missing top†? of the firm-size distribution with additional large firms, governments should support the creation of such firms by opening markets to greater competition. In low-income countries, this objective can be achieved through simple policy reorientation, such as breaking oligopolies, removing unnecessary restrictions to international trade and investment, and establishing strong rules to prevent the abuse of market power. Governments should also strive to ensure that private actors have the skills, technology, intelligence, infrastructure, and finance they need to create large ventures. Additionally, they should actively work to spread the benefits from production at scale across the largest possible number of market participants. This book seeks to bring frontier thinking and evidence on the role and origins of large firms to a wide range of readers, including academics, development practitioners and policy makers.
Author: Christian Saborowski Publisher: International Monetary Fund ISBN: 149831113X Category : Business & Economics Languages : en Pages : 25
Book Description
This paper examines the variation in life cycle growth across the universe of Mexican firms. We establish two stylized facts to motivate our analysis: first, we show that firm size matters for development by illustrating a close correlation with state-level per capita incomes. Second, we show that few firms grow as much as their U.S. peers while the majority stagnates at less than twice their initial size. To gain insights into the distinguishing characteristics of the two groups, we then econometrically decompose life cycle growth across firms. We find that firms that have financial access and multiple establishments and that are formal, part of diversified industries and located in population centers can grow at sizeable rates.
Author: Cihan Artunç Publisher: ISBN: Category : Languages : en Pages : 71
Book Description
This paper explores how macroeconomic conditions affect firm dynamics in Egypt between 1911 and 1948 by constructing an extensive dataset of all companies ever founded in this period. By exploiting Egyptian economy's specialization in cotton exports, I use fluctuations in the world price of cotton to identify the direct impact of the business cycle on firm entry, exit, and growth. The analysis shows that growth occurred primarily at the extensive margin. Firm entry was procyclical but exit and growth were both acyclical. The new evidence reveals cyclical selection into entry. Booms systematically selected low quality entrants, which were smaller, less likely to grow after entry, and frailer than other cohorts. Bust cohorts were larger, more likely to grow, and more robust. The quality differences were persistent over the firms' lifecycles. These new findings support a theory of firm dynamics with ex-ante heterogeneous firms, permanent productivity differences between cohorts, and economic adjustment through the extensive margin of entry.
Author: Juliane Begenau Publisher: ISBN: Category : Languages : en Pages : 40
Book Description
Data from U.S. public firms show that in booms large firms finance with debt and payout equity, while small firms issue both equity and debt. Therefore, large firms generally substitute between debt and equity financing over the business cycle, whereas small firms' financing policy for debt and equity is procyclical. We propose a novel mechanism to explain these cyclical financing patterns in a heterogeneous firm model with endogenous firm dynamics. We find that cross-sectional differences in investment returns and, therefore, funding needs as well as exposures to financial frictions are essential to understanding how firms' financing policies respond to macroeconomic shocks.
Author: Sara Moreira Publisher: ISBN: Category : Languages : en Pages : 89
Book Description
This paper examines how the state of the economy when businesses begin operations affects their size and performance over the lifecycle. Using micro-level data that covers the entire universe of businesses operating in the U.S. since the late 1970s, I provide new evidence that businesses born in downturns start on a smaller scale and remain smaller over their entire lifecycle. In fact, I find no evidence that these differences attenuate even long after entry. Using new data on the productivity and composition of startup businesses, I show that this persistence is related to selection at entry and demand-side channels. In order to evaluate the relative importance of these two mechanisms, I build a model of firm dynamics that includes aggregate shocks, idiosyncratic productivity, and a demand accumulation process. When I mute the effects of selection mechanisms, I find that the average initial size differences are more procyclical, but they are less persistent over time. Finally, I use the model to quantitatively evaluate the role of the persistent effects of entry conditions in the propagation of the Great Recession. My model simulations indicate that the impact of the crisis on the 2008-2009 cohorts reduces aggregate employment by at least one percentage point in the following ten years.
Author: Vasco M. Carvalho
Author: Vasco M. Carvalho
Author: João Ayres
Author: Teresa C. Fort
Author: Andrea Ciani
Author: Christian Saborowski
Author: Vivek Ghosal
Author: Cihan Artunç
Author: Juliane Begenau
Author: Sara Moreira
Author: