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Working Paper
Entrepreneurship and State Taxation
Entrepreneurship plays a vital role in the economy, yet there exists little well-identified research into the effects of taxes on startup activity. Using recently developed county-level data on startups, we examine the effect of states' corporate, personal and sales tax rates on new firm activity and test for cross-border spillovers in response to these policies. We find that new firm employment is negatively?and disproportionately?affected by corporate tax rates. We find little evidence of an effect of personal and sales taxes on entrepreneurial outcomes. Our results are robust to changes in ...
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How Exporters Grow
We show that after firms enter new export markets, there are striking dynamics of quantities, but no dynamics of prices, controlling for both costs and selection. This points to an important role for demand in the growth of successful exporters, and to a nonprice mechanism through which quantity demanded grows. A model where firms engage in costly investment in customer base through marketing and advertising, and learn about their idiosyncratic demand, can qualitatively match these facts, along with a declining exit hazard. We structurally estimate the model and find that costs of adjusting ...
Working Paper
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, ...
Working Paper
Learning, Prices, and Firm Dynamics
We document new facts about the evolution of firm performance and prices in international markets, and propose a theory of firm dynamics emphasizing the interaction between learning about demand and quality choice to explain the observed patterns. Using data from the Portuguese manufacturing sector, we find that: (1) firms with longer spells of activity in export destinations tend to ship larger quantities at lower prices; (2) older exporters tend to use more expensive inputs; (3) revenue growth within destinations (conditional on initial size) tends to decline with market experience; and (4) ...
Working Paper
Spread Too Thin: The Impact of Lean Inventories
Widespread adoption of just-in-time (JIT) production has reduced inventory holdings. This paper finds that JIT creates a trade-off between firm profitability and vulnerability to large shocks. Empirically, JIT adopters experience higher sales and less volatility while also exhibiting heightened cyclicality and sensitivity to natural disasters. I explain these facts in a structurally estimated general equilibrium model where firms can adopt JIT. Relative to a no-JIT economy, the estimated model implies a 1.3% increase in firm value. At the same time, an unanticipated shock results in a roughly ...
Working Paper
Business Exit During the COVID-19 Pandemic: Non-Traditional Measures in Historical Context
Given lags in official data releases, economists have studied "alternative data" measures of business exit resulting from the COVID-19 pandemic. Such measures are difficult to understand without historical context, so we review official data on business exit in recent decades. Business exit is common in the U.S., with about 7.5 percent of firms exiting annually in recent years, and is countercyclical (particularly recently). Both the high level and the cyclicality of exit are driven by very small firms. We explore a range of alternative measures and indicators of business exit, including ...
Working Paper
Early Joiners and Startup Performance
We show that early joiners---non-founder employees in the first year of a startup---play a critical role in explaining firm performance. We use administrative employee-employer matched data on all US startups and utilize the premature death of workers as a natural experiment exogenously separating talent from young firms. We find that losing an early joiner has a large negative effect on firm size that persists for at least ten years. When compared to that of a founder, losing an early joiner has a smaller effect on firm death but intensive margin effects on firm size are similar in ...
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Appendix for How Exporters Grow
No abstract