Firm Entry and Employment Dynamics in the Great Recession

Posted: 9 Jul 2021

See all articles by Michael Siemer

Michael Siemer

affiliation not provided to SSRN

Date Written: July, 2014

Abstract

The 2007-2009 recession is characterized by: a large drop in employment, an unprecedented decline in firm entry, and a slow recovery. Using confidential firm-level data, I show that financial constraints reduced employment growth in small relative to large firms by 4.8 to 10.5 percentage points. The effect of financial constraints is robust to controlling for aggregate demand and is particularly strong in small young firms. I show in a heterogeneous firms model with endogenous firm entry and financial constraints that a large financial shock results in a long-lasting recession caused by a \"missing generation\" of entrants.

JEL Classification: E24, E32, E44, G01, J20, L25

Suggested Citation

Siemer, Michael, Firm Entry and Employment Dynamics in the Great Recession (July, 2014). FEDS Working Paper No. 2014-56, Available at SSRN: https://ssrn.com/abstract=3879387

Michael Siemer (Contact Author)

affiliation not provided to SSRN

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