Firm Dynamics and Productivity Growth

European Investment Bank Papers, Vol. 16, No. 1, pp. 116-136, 2011

21 Pages Posted: 13 Jan 2012

See all articles by John Haltiwanger

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Date Written: December 16, 2011

Abstract

Countries differ substantially in the extent to which more productive firms are large and/or are becoming larger and less productive firms are small and/or becoming smaller. A challenge for both emerging and advanced economies is that achieving such static and dynamic allocative efficiency requires an ongoing process of restructuring and reallocation. Such restructuring and reallocation is by its very nature costly. Market structure and institutions that promote well-functioning business dynamism are, accordingly, critical for economic performance. In the 1980s and 1990s, the US exhibited a robust pace of business dynamism that contributed substantially to US productivity and job growth. There are, however, some disturbing trends in the nature of US business dynamism – for example, the pace of business startups has declined secularly especially over the last decade. The decline in the pace of business dynamism may be contributing to the anaemic US recovery from the recent recession.

Keywords: Productivity, Job Creation, Business Startups

JEL Classification: L26, J63, O47

Suggested Citation

Haltiwanger, John C., Firm Dynamics and Productivity Growth (December 16, 2011). European Investment Bank Papers, Vol. 16, No. 1, pp. 116-136, 2011. Available at SSRN: https://ssrn.com/abstract=1984016

John C. Haltiwanger (Contact Author)

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

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