Who Quits Next? Firm Growth in Growing Economies Articles uri icon

publication date

  • January 2019

start page

  • 33

end page

  • 49

issue

  • 1

volume

  • 57

International Standard Serial Number (ISSN)

  • 0095-2583

Electronic International Standard Serial Number (EISSN)

  • 1465-7295

abstract

  • We document novel facts about the relationship between aggregate growth and firm dynamics using a large set of countries. We argue that firm employment patterns are not necessarily informative about cross‐country differences in aggregate growth because they are induced by changes in the productivity of a firm relative to others. In contrast, aggregate growth is linked to average firm‐level productivity growth and firm age. We formalize this intuition through a tractable model of endogenous aggregate growth and firm dynamics where firms realize positive returns to investment with some probability. We find that cross‐country disparities in this probability can account for two‐thirds of the variation in aggregate growth.

subjects

  • Economics

keywords

  • firm dynamics; productivity; selection; economic growth; cross-country; data.