How Firms Respond to Business Cycles: The Role of Firm Age and Firm Size

Abstract

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/w19134.ack NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Temporary agency work and the Great Recession

“…Finally, on a more general note, this paper has also highlighted that firms/establishments adjust their labour input in response to a demand shock in numerous ways other than via the number of regular workers. Hence, studies analysing the cyclicality of labour demand at the firm level (e.g., Fort et al, 2013) or the job and worker turnover patterns in response to exchange rate (or other globalization) shocks (e.g., Klein et al, 2003;Moser et al, 2010) most likely underestimate the strength of the employment adjustment if they only focus on the number of regular workers.…”

Firm size and business cycles

“…When the analysis distinguishes between firm size and age, the results indicate that the greater sensitivity of large firms relative to small firms to cyclical conditions is mainly driven by maturity of firms [9]. In other words, the idea that larger firms are more cyclically sensitive receives greater support when the analysis is restricted to a subset of smaller and older firms, suggesting that smaller and younger firms may be more sensitive than previously thought [8].…”

“…More recent studies have contributed to this line of research and provided more insights about the issue of firm size and sensitivity to cycles [1], [7], [8], [9], [10]. Importantly, this new wave of studies also provides robust results based on microdata that allow researchers to control for reclassification bias.…”

“…controls for region and year specific characteristics [7], [9]. The use of region-level heterogeneity generates more robust results, indicating that the job-poaching related to job-ladder models does not necessarily mean that high wage firms are more sensitive to business cycles if they experience a smaller decline in net hires from unemployment than low wage firms during recessions [7].…”

Anatomy of a Credit Crunch: From Capital to Labor Markets

“…We classify a firm as small if its employment at the beginning of the period is less than or equal to l m,t and as large if it is above l m,t . 14 With respect to age, we follow Fort et al (2012) and consider firms aged 5 years or less as young and the rest as old. Lastly, our method of aggregating job flows across firms within each age-size category is similar to that of Davis et al (1998).…”