Where Has All the Skewness Gone? The Decline in High-Growth (Young) Firms in the U.S

68 Pages Posted: 7 Dec 2015 Last revised: 4 Jan 2016

See all articles by Ryan Decker

Ryan Decker

Board of Governors of the Federal Reserve System

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

Javier Miranda

U.S. Census Bureau - Center for Administrative Records Research and Applications

Date Written: December 2015

Abstract

The pace of business dynamism and entrepreneurship in the U.S. has declined over recent decades. We show that the character of that decline changed around 2000. Since 2000 the decline in dynamism and entrepreneurship has been accompanied by a decline in high-growth young firms. Prior research has shown that the sustained contribution of business startups to job creation stems from a relatively small fraction of high-growth young firms. The presence of these high-growth young firms contributes to a highly (positively) skewed firm growth rate distribution. In 1999, a firm at the 90th percentile of the employment growth rate distribution grew about 31 percent faster than the median firm. Moreover, the 90-50 differential was 16 percent larger than the 50-10 differential reflecting the positive skewness of the employment growth rate distribution. We show that the shape of the firm employment growth distribution changes substantially in the post-2000 period. By 2007, the 90-50 differential was only 4 percent larger than the 50-10, and it continued to exhibit a trend decline through 2011. The overall decline reflects a sharp drop in the 90th percentile of the growth rate distribution accounted for by the declining share of young firms and the declining propensity for young firms to be high-growth firms.

Suggested Citation

Decker, Ryan and Haltiwanger, John C. and Jarmin, Ron S. and Miranda, Javier, Where Has All the Skewness Gone? The Decline in High-Growth (Young) Firms in the U.S (December 2015). NBER Working Paper No. w21776. Available at SSRN: https://ssrn.com/abstract=2700005

Ryan Decker (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
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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 )

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

P.O. Box 7240
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Ron S. Jarmin

U.S. Census Bureau ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

Javier Miranda

U.S. Census Bureau - Center for Administrative Records Research and Applications ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

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