May 2016

Firm Entry and Macroeconomic Dynamics: A State-level Analysis

Francois Gourio, Todd Messer, and Michael Siemer


Using an annual panel of US states over the period 1982-2014, we estimate the response of macroeconomic variables to a shock to the number of new firms (startups). We find that these shocks have significant effects that persist for many years on real GDP, productivity, and population. This is consistent with simple models of firm dynamics where a "missing generation" of firms affects productivity persistently.

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Keywords: Productivity, business dynamics, employment, firm entry, missing generation, new business formation


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Last Update: June 19, 2020