From Population Growth to Firm Demographics: Implications for Concentration, Entrepreneurship and the Labor Share

By Hugo Hopenhayn, Julian Neira, Rish Singhania. Econometrica, 2018

141 citations recorded by the source corpus.

In the U.S., large firms now account for a greater share of economic activity, new firms are being created at slower rates, and workers are receiving a smaller share of GDP. Changes in population growth provide a unified quantitative explanation. A decrease in population growth lowers firm entry rates, shifting the firm‐age distribution toward older firms. Firm aging accounts for (i) the concentration of employment in large firms, (ii) and trends in average firm size and exit rates, key determinants of firm entry rates. Feedback effects from firm demographics generate two‐thirds of the effect. Prior to the decrease, entry rates rose steadily reflecting the earlier baby boom. The glut of firms due to the baby boom lead to rich transitional dynamics within the feedback effects, accounting for more than half the total change. Baby boom induced changes in the firm‐age distribution provide a driving force for the post‐WWII rise and fall in the aggregate labor share. Ignoring changes in population growth attributes all the long run decline in entry rates to a decrease in firm exit rates, which in reality have been only one‐third as large.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/1b0bb138a03cc6d9f7510669d1a1a4052fb2d13f

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Citations in the corpus

Democracy and Entrepreneurship (2020, background): “…(2019),, “Business Dynamics and Digitalisation,” OECD Science, Technology and Industry Policy Papers, No. 62, OECD Publishing, Paris, https://doi.org/10.1787/6e0b011a-en less than one year old, declined by around 50 percent between 1978 and 2011 (Hopenhayn et al., 2019; Hathaway & Litan, 2014).”
What Happened to US Business Dynamism? (2019, unknown): “, 2017); a fall in corporate tax rates (Kaymak and Schott, 2018); a slowdown in population growth (Hopenhayn et al., 2018); a slowdown in productivity growth (Grossman et al.”
Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory (2019, unknown): “28 A large literature has argued that geographical proximity to the knowledge source plays a very crucial role in knowledge diffusion [Jaffe et al. (1993), Audretsch and Feldman (1996), Porter (2000)]. If the ability to utilize spillovers from other firms depends on the geographical proximity to the”
The Elusive Explanation for the Declining Labor Share (2021, background): “Yet another possible link between the rate of population growth and the functional distribution of income is proposed by Hopenhayn et al. (2018).”
Diverging Trends in National and Local Concentration (2018, unknown): “…(e.g., Autor et al. 2017).2 Some studies have called into question the interpretation of these facts as evidence of increasing market power (see Hopenhayn, Neira, and Singhania 2018; Syverson 2019), and the empirical robustness and validity of some of these trends have also been contested in…”