Births-Deaths Nexus of Firms: Estimating VAR with Panel Data

Births-Deaths Nexus of Firms: Estimating VAR with Panel Data This paper investigates dynamic interrelationships between the births and deaths of firms at the level of the 88 Finnish subregions during 1989–1993. The births-deaths nexus of firms is analysed using vector autoregressions (VAR) and an instrumental variable estimator. The main findings are: first, that the firm births equation has a two-year lag structure, which means that firm deaths cause firm births, and firm births cause subsequent births following two- year lags; and second, that according to the firm deaths equation, which has a one-year lag structure, firm births do not cause firm deaths, but firm deaths cause subsequent deaths. A further finding is that the use of the ordinary least-squares estimator produces inconsistent, and clearly different results from those produced by the instrumental variable estimator. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Births-Deaths Nexus of Firms: Estimating VAR with Panel Data

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1998 by Kluwer Academic Publishers
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1023/A:1008061813017
Publisher site
See Article on Publisher Site

Abstract

This paper investigates dynamic interrelationships between the births and deaths of firms at the level of the 88 Finnish subregions during 1989–1993. The births-deaths nexus of firms is analysed using vector autoregressions (VAR) and an instrumental variable estimator. The main findings are: first, that the firm births equation has a two-year lag structure, which means that firm deaths cause firm births, and firm births cause subsequent births following two- year lags; and second, that according to the firm deaths equation, which has a one-year lag structure, firm births do not cause firm deaths, but firm deaths cause subsequent deaths. A further finding is that the use of the ordinary least-squares estimator produces inconsistent, and clearly different results from those produced by the instrumental variable estimator.

Journal

Small Business EconomicsSpringer Journals

Published: Oct 6, 2004

References

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