Pay, Employment, and Dynamics of Young Firms
Why do young firms pay less? Using confidential microdata from the US Census Bureau, we find lower earnings among workers at young firms. However, we argue that such measurement is likely subject to worker and firm selection. Exploiting the two-sided panel nature of the data to control for relevant dimensions of worker and firm heterogeneity, we uncover a positive and significant young-firm pay premium. Furthermore, we show that worker selection at firm birth is related to future firm dynamics, including survival and growth. We tie our empirical findings to a simple model of pay, employment, ...
Going Entrepreneurial? IPOs and New Firm Creation
Using matched employee-employer US Census data, we examine the effect of a successful initial public offering (IPO) on employee departures to startups. Accounting for the endogeneity of a firm?s choice to go public, we find strong evidence that going public induces employees to leave for start-ups. Moreover, we document that the increase in turnover following an IPO is driven by employees departing to start-ups; we find no change in the rate of employee departures for established firms. We present evidence that, following an IPO, many employees who received stock grants experience a positive ...
Are the Borrowing Costs of Large Financial Firms Unusual?
Estimates of investor expectations of government support of large financial firms are often based on large financial firms' lower borrowing costs relative to smaller financial firms. Using pricing data on credit default swaps (CDS) and corporate bonds over the period 2004 to 2013, however, we find that the CDS and bond spreads of financial firms are no more sensitive to borrower size than the spreads of non-financial firms. Outside of the financial crisis period, spreads are more sensitive to borrower size in several non-financial industries. We find that size-related differences in spreads ...
How Did Young Firms Fare During the Great Recession? Evidence from the Kauffman Firm Survey
We examine the evolution of several key firm economic and financial variables in the years surrounding and during the Great Recession using the Kauffman Firm Survey, a large panel of young firms founded in 2004 and surveyed for eight consecutive years. We find that these young firms experienced slower growth in revenues, employment, and assets and faced tighter financing conditions during the recessionary years. While we find some evidence that firm growth picked up following the recession, it is not clear that it returned to the levels it would have been absent the recessionary shock. We ...
Large-Scale Buy-to-Rent Investors in the Single-Family Housing Market: The Emergence of a New Asset Class?
In 2012, several large firms began purchasing single-family homes with the stated intention of creating large portfolios of rental property. We present the first systematic evidence on how this new investor activity differs from that of other investors in the housing market. Many aspects of buy-to-rent investor behavior are consistent with holding property for rent rather than reselling quickly. Additionally, the large size of these investors imparts a few important advantages. In the short run, this investment activity appears to have supported house prices in the areas where it is ...
Firm Leverage, Labor Market Size, and Employee Pay
We provide new estimates of the wage costs of firms' debt. Our empirical approach exploits within-firm geographical variation in workers' expected unemployment costs due to variation in local labor market size and uses a large representative sample of public firms. We find that, following an increase in firm leverage, workers with higher unemployment costs experience higher wage growth relative to workers at the same firm with lower unemployment costs. Overall, our estimates suggest that a 10 percentage point increase in leverage increases wage compensation for the median worker by 1.9% and ...
Issues Regarding the Use of the Policy Rate Tool
We review two nonstandard uses of the policy rate tool, which provide additional stimulus when interest rates are close to or at the effective lower bound—forward guidance and negative interest rate policy. In particular, we survey the use of these tools since the star otf the Great Recession, review evidence of their effectiveness, and discuss key considerations that confront monetary policymakers while using them.
Who works for startups? The relation between firm age, employee age, and growth
Young firms disproportionately employ young workers, controlling for firm size, industry, geography and time. The same positive correlation between young firms and young employees holds when we look just at new hires. On average, young employees in young firms earn higher wages than young employees in older firms. Further, young employees disproportionately join young firms with greater innovation potential and that exhibit higher growth, conditional on survival. These facts are consistent with the argument that the skills, risk tolerance, and career dynamics of young workers are contributing ...
An Aggregate View of Bank Lending Standards and Demand
The Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) provides information about the supply of, and demand for, bank credit in the United States on a quarterly basis. SLOOS responses are used internally by Federal Reserve staff in monitoring bank lending conditions and as an input into research and analysis about broader economic and financial conditions.