Turmoil and Growth: Young Businesses, Economic Churning, and Productivity Gains

12 Pages Posted: 12 Oct 2011

See all articles by Steven J. Davis

Steven J. Davis

University of Chicago; National Bureau of Economic Research (NBER)

John Haltiwanger

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

Date Written: June 5, 2008

Abstract

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.

Keywords: young business, business, growth, new business, productivity, churning

Suggested Citation

Davis, Steven J. and Haltiwanger, John C. and Jarmin, Ron S., Turmoil and Growth: Young Businesses, Economic Churning, and Productivity Gains (June 5, 2008). Available at SSRN: https://ssrn.com/abstract=1139944 or http://dx.doi.org/10.2139/ssrn.1139944

Steven J. Davis (Contact Author)

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
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773-702-7312 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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John C. Haltiwanger

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Ron S. Jarmin

U.S. Census Bureau ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

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