The Growth Potential of Startups over the Business Cycle†

The Growth Potential of Startups over the Business Cycle† AbstractThis paper shows that employment in cohorts of US firms is strongly influenced by aggregate conditions at the time of their entry. Employment fluctuations of startups are procyclical, they persist into later years, and cohort-level employment variations are largely driven by differences in firm size, rather than the number of firms. An estimated general equilibrium firm dynamics model reveals that aggregate conditions at birth, rather than post-entry choices, drive the majority of cohort-level employment variation by affecting the share of startups with high growth potential. In the aggregate, changes in startup conditions result in large, slow-moving fluctuations in employment. (JEL D25, E24, E32, J23, L25, M13) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

The Growth Potential of Startups over the Business Cycle†

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Publisher
American Economic Association
Copyright
Copyright © 2017 © American Economic Association
ISSN
0002-8282
D.O.I.
10.1257/aer.20141280
Publisher site
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Abstract

AbstractThis paper shows that employment in cohorts of US firms is strongly influenced by aggregate conditions at the time of their entry. Employment fluctuations of startups are procyclical, they persist into later years, and cohort-level employment variations are largely driven by differences in firm size, rather than the number of firms. An estimated general equilibrium firm dynamics model reveals that aggregate conditions at birth, rather than post-entry choices, drive the majority of cohort-level employment variation by affecting the share of startups with high growth potential. In the aggregate, changes in startup conditions result in large, slow-moving fluctuations in employment. (JEL D25, E24, E32, J23, L25, M13)

Journal

American Economic ReviewAmerican Economic Association

Published: Oct 1, 2017

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