Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
Firm Entry and Employment Dynamics in the Great Recession
The 2007-2009 recession is characterized by: a large drop in employment, an unprecedented decline in firm entry, and a slow recovery. Using confidential firm-level data, I show that financial constraints reduced employment growth in small relative to large firms by 4.8 to 10.5 percentage points. The effect of financial constraints is robust to controlling for aggregate demand and is particularly strong in small young firms. I show in a heterogeneous firms model with endogenous firm entry and financial constraints that a large financial shock results in a long-lasting recession caused by a "missing generation" of entrants.
Cite this item
Michael Siemer, Firm Entry and Employment Dynamics in the Great Recession, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2014-56, 30 Jul 2014.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G01 - Financial Economics - - General - - - Financial Crises
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
Keywords: Employment; firm entry; financial crisis; small business; financial friction; slow recovery; start-ups
This item with handle RePEc:fip:fedgfe:2014-56
is also listed on EconPapers
For corrections, contact Ryan Wolfslayer ()