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The Nature of Firm Growth

Sterk, V; Sedlacek, P; Pugsley, BW; (2021) The Nature of Firm Growth. The American Economic Review , 111 (2) pp. 547-579. 10.1257/aer.20190748. Green open access

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About one-half of all startups fail within five years, and those that survive grow at vastly different speeds. Using Census microdata, we estimate that most of these differences are determined by ex ante heterogeneity rather than persistent ex post shocks. Embedding such heterogeneity in a firm dynamics model shows that the presence of ex ante heterogeneity (i) is a key determinant of the firm size distribution and firm dynamics, (ii) can strongly affect the macroeconomic effects of firm-level frictions, and (iii) helps understand the recently documented decline in business dynamism by showing a disappearance of high-growth startups ("gazelles") since the mid-1980s.

Type: Article
Title: The Nature of Firm Growth
Open access status: An open access version is available from UCL Discovery
DOI: 10.1257/aer.20190748
Publisher version: https://doi.org/10.1257/aer.20190748
Language: English
Additional information: This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10109806
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