The Nature of Firm Growth

46 Pages Posted: 5 Feb 2018

See all articles by Benjamin W. Pugsley

Benjamin W. Pugsley

University of Notre Dame - Department of Economics

Petr Sedlacek

University of Oxford

Vincent Sterk

University College London

Multiple version iconThere are 2 versions of this paper

Date Written: January 2018

Abstract

Only half of all startups survive past the age of five and surviving businesses grow at vastly different speeds. Using micro data on employment in the population of U.S. businesses, we estimate that the lion's share of these differences is driven by ex-ante heterogeneity across firms, rather than by ex-post shocks. We embed such heterogeneity in a firm dynamics model and study how ex-ante differences shape the distribution of firm size, "up-or-out" dynamics, and the associated gains in aggregate output. "Gazelles" -- a small subset of startups with particularly high growth potential -- emerge as key drivers of these outcomes. Analyzing changes in the distribution of ex-ante firm heterogeneity over time reveals that the birth rate and growth potential of gazelles has declined, creating substantial aggregate losses.

Keywords: Big Data, Firm Dynamics, Macroeconomics, Startups

JEL Classification: D22, E23, E24

Suggested Citation

Pugsley, Benjamin W. and Sedlacek, Petr and Sterk, Vincent, The Nature of Firm Growth (January 2018). CEPR Discussion Paper No. DP12670, Available at SSRN: https://ssrn.com/abstract=3118318

Benjamin W. Pugsley (Contact Author)

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

Petr Sedlacek

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Vincent Sterk

University College London ( email )

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
550
PlumX Metrics