Entry, Exit, Firm Dynamics, and Aggregate Fluctuations
By G. Clementi, Berardino Palazzo. 2016
365 citations recorded by the source corpus.
Do firm entry and exit play a major role in shaping aggregate dynamics? Our answer is yes. Entry and exit propagate the effects of aggregate shocks. In turn, this results in greater persistence and unconditional variation of aggregate time-series. These are features of the equilibrium allocation in Hopenhayn (1992)'s model of equilibrium industry dynamics, amended to allow for investment in physical capital and aggregate fluctuations. In the aftermath of a positive productivity shock, the number of entrants increases. The new firms are smaller and less productive than the incumbents, as in the data. As the common productivity component reverts to its unconditional mean, the new entrants that survive become more productive over time, keeping aggregate efficiency higher than in a scenario without entry or exit.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/d1630a27332f35535e7f90f06654e63061650f7e
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In Economics and Econometrics
Citations in the corpus
- Firm Entry and Employment Dynamics in the Great Recession (2014, neutral): “The setup of this paper di↵ers from existing work such as Clementi and Palazzo (2010) and Lee and Mukoyama (2012) in an important way: I assume that firms need to externally finance a fraction of the entry cost.”
- Financial Heterogeneity and the Investment Channel of Monetary Policy (2018, neutral): “Other studies argue that the firm-level response also depends on size (Gertler and Gilchrist (1994)), liquidity (Jeenas (2019)), or age (Cloyne et al. (2018)). Online Appendix C shows that our results are robust to controlling for these other firm characteristics. Our results do not necessarily cont”
- Productivity growth in Italy: a tale of a slow-motion change (2018, neutral): “Negative financial shocks are indeed associated with significant declines in start-up rates (Bergin et al. 2014) which, in turn, amplify and propagate over time the effects of those shocks on the economy (Clementi and Palazzo, 2016).”
- Firm selection and corporate cash holdings (2020, background): “55 Persistence idiosyncratic shock Clementi and Palazzo (2013) σ = 0.”