Working Paper

Firm Entry and Macroeconomic Dynamics: A State-level Analysis

Abstract: Using an annual panel of US states over the period 1982-2014, we estimate the response of macroeconomic variables to a shock to the number of new firms (startups). We find that these shocks have significant effects that persist for many years on real GDP, productivity, and population. This result is consistent with simple models of firm dynamics where a ?missing generation? of firms affects productivity persistently.

Keywords: Productivity; Business dynamics; Employment; Firm entry; Missing generation; New business formation;

JEL Classification: E24; E32; L25; L26;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2016-02

Number: 2016-043

Pages: 8 pages