Firm Growth Through New Establishments

Cao, Dân; Hyatt, Henry; Mukoyama, Toshihiko; Sager, Erick

doi:10.2139/ssrn.3361451

Cited by 15 publications

(18 citation statements)

References 16 publications

(31 reference statements)

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“…For this reason, we need multi-product firms to obtain a dispersed distribution. 12 This model strategy is consistent with the finding by Cao et al (2018) that firms grow by adding new establishments (extensive margin) rather than by increasing employment per establishment (intensive margin). Certainly, we do not intend to argue that the intensive margin is unimportant.…”

Section: Householdsupporting

confidence: 77%

Reallocation Effects of Monetary Policy

2020

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Responding to the increased attention on the distributional aspects of monetary policy, we investigate the reallocation among heterogeneous firms triggered by nominal growth. Japanese firm-level data show that large firms invest more in R&D and grow faster than small firms under higher inflation. We then construct a model that introduces nominal rigidity into R&D-driven endogenous growth with heterogeneous firms. The model shows that high nominal growth leads to an increase in the market share of innovative firms because menu-cost burdens are relatively heavier for less innovative firms. This reallocation effect yields a positive effect of monetary expansion on both real growth and welfare. The optimal nominal growth can be strictly positive even under nominal rigidity. Moreover, the presence of menu costs can improve welfare.

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Section: Householdsupporting

confidence: 77%

Reallocation Effects of Monetary Policy

2020

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“…9 Consistent with our findings, Cao et al (2019) use data from the Quarterly Census of Employment and Wages between 1990 and 2015 to document an increase in the average number of establishments per firm. They do not relate the change to measures of industry concentration but show that the increase is more pronounced for larger firms and in the service sector.…”

Section: Fact 4 Industry Concentration Is Due To Extensive Margin Growthsupporting

confidence: 65%

The Industrial Revolution in Services

Hsieh

Rossi‐Hansberg

2019

SSRN Journal

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for helpful discussions. The data from the US Census has been reviewed by the U.S. Census Bureau to ensure no confidential information is disclosed. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w25968.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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“…Finally, we have abstracted from the underlying causes of changes in exit rates and productivity growth across firms and over time. Understanding these patterns, as explored in Aghion et al (2019) and Cao et al (2019), remains an important area for further work.…”

Section: Discussionmentioning

confidence: 99%

The Role of Nonemployers in Business Dynamism and Aggregate Productivity

Bento¹,

Restuccia²

2019

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A well-documented observation of the U.S. economy in the last few decades has been the steady decline in the net entry rate of employer firms, a decline in business dynamism, suggesting a possible connection with the recent slowdown in aggregate productivity growth. We consider the role of nonemployers, businesses without paid employees, in business dynamism and aggregate productivity. Notwithstanding the decline in the growth of employer firms, we show that the total number of firms, which includes nonemployer businesses, has increased in the U.S. economy since the early 1980s. We interpret this trend, along with the evolution of the employment distribution across firms, through the lens of a standard theory of firm dynamics. The model implies that firm dynamics have contributed to an average annual growth rate of aggregate productivity of at least 0.26% since the early 1980s, over one quarter of the productivity growth of 1% in the data. Further, our implied measure of productivity growth moves closely over time with measured productivity growth in the data.

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Firm Growth Through New Establishments

Cited by 15 publications

References 16 publications

Reallocation Effects of Monetary Policy

Reallocation Effects of Monetary Policy

The Industrial Revolution in Services

The Role of Nonemployers in Business Dynamism and Aggregate Productivity

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