American Economic Review Vol. 111 No. 2 2021
The Nature of Firm Growth
open access
Abstract
About one-half of all startups fail within five years, and those that survive grow at vastly different speeds. Using Census microdata, we estimate that most of these differences are determined by ex ante heterogeneity rather than persistent ex post shocks. Embedding such heterogeneity in a firm dynamics model shows that the presence of ex ante heterogeneity (i) is a key determinant of the firm size distribution and firm dynamics, (ii) can strongly affect the macroeconomic effects of firm-level frictions, and (iii) helps understand the recently documented decline in business dynamism by showing a disappearance of high-growth startups (“gazelles”) since the mid-1980s.
- DOI
- 10.1257/aer.20190748
- Volume
- 111
- Issue
- 2
- Pages
- 547-579
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref