Volatility and Dispersion in Business Growth Rates: Publicly Traded Versus Privately Held Firms

54 Pages Posted: 14 Jul 2006 Last revised: 30 Oct 2014

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

Javier Miranda

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

Date Written: July 2006

Abstract

We study the variability of business growth rates in the U.S. private sector from 1976 onwards. To carry out our study, we exploit the recently developed Longitudinal Business Database (LBD), which contains annual observations on employment and payroll for all U.S. businesses. Our central finding is a large secular decline in the cross sectional dispersion of firm growth rates and in the average magnitude of firm level volatility. Measured the same way as in other recent research, the employment-weighted mean volatility of firm growth rates has declined by more than 40% since 1982. This result stands in sharp contrast to previous findings of rising volatility for publicly traded firms in COMPUSTAT data. We confirm the rise in volatility among publicly traded firms using the LBD, but we show that its impact is overwhelmed by declining volatility among privately held firms. This pattern holds in every major industry group. Employment shifts toward older businesses account for 27 percent or more of the volatility decline among privately held firms. Simple cohort effects that capture higher volatility among more recently listed firms account for most of the volatility rise among publicly traded firms.

Suggested Citation

Davis, Steven J. and Haltiwanger, John C. and Jarmin, Ron S. and Miranda, Javier, Volatility and Dispersion in Business Growth Rates: Publicly Traded Versus Privately Held Firms (July 2006). NBER Working Paper No. w12354. Available at SSRN: https://ssrn.com/abstract=913317

Steven J. Davis (Contact Author)

University of Chicago ( email )

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National Bureau of Economic Research (NBER)

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John C. Haltiwanger

University of Maryland - Department of Economics ( email )

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301-405-3504 (Phone)
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National Bureau of Economic Research (NBER) ( email )

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

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Germany

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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