Turmoil and Growth: Young Businesses, Economic Churning, and Productivity Gains
Steven J. Davis
University of Chicago; National Bureau of Economic Research (NBER)
University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)
Ron S. Jarmin
U.S. Census Bureau
June 5, 2008
The current economic turmoil arouses much anxiety and concern among the public, the business sector, and the policy-making community. Eventually, however, the economy will recover and resume sustained growth, just as it has after previous slowdowns or recessions. But some turmoil - specifically the churning of firms and jobs - will continue even in good times. It is inherent in any dynamic capitalist economy that some firms thrive and grow while others decline and sometimes fail. This essay summarizes recent economic research on the key role this churning process plays in enhancing economy-wide productivity growth. Sorting successful business endeavors from unsuccessful ones is, in fact, a central and necessary part of our market economy, and it is essential that the public and policy makers understand this process.
Number of Pages in PDF File: 12
Keywords: young business, business, growth, new business, productivity, churningworking papers series
Date posted: October 12, 2011
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