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The nature of firm growth

Pugsley, Benjamin W., Sedlacek, Petr and Sterk, Vincent (2017) The nature of firm growth. CFM Discussion Paper Series (CFM-DP2017-37). Centre For Macroeconomics, London, UK.

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Abstract

Only half of all startups survive past the age of ve and surviving businesses grow at vastly di erent speeds. Using micro data on employment in the population of U.S. businesses, we estimate that the lion's share of these differences is driven by ex-ante heterogeneity across fi rms, rather than by ex-post shocks. We embed such heterogeneity in a fi rm dynamics model and study how ex-ante differences shape the distribution of fi rm size, "up-or-out" dynamics, and the associated gains in aggregate output. "Gazelles" - a small subset of startups with particularly high growth potential - emerge as key drivers of these outcomes. Analyzing changes in the distribution of ex-ante fi rm heterogeneity over time reveals that gazelles are driven towards extinction, creating substantial aggregate losses.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.centreformacroeconomics.ac.uk/Discussio...
Additional Information: © 2017 The Authors
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E23 - Production
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
Date Deposited: 13 Mar 2018 09:16
Last Modified: 08 Feb 2021 00:23
URI: http://eprints.lse.ac.uk/id/eprint/87173

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