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Births-Deaths Nexus of Firms: Estimating VAR with Panel Data

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  • Kangasharju, Aki
  • Moisio, Antti

Abstract

This paper investigates dynamic interrelationships between the births and deaths of firms at the level of the 88 Finnish subregions during 1989-93. The births-deaths nexus of firms is analysed using vector autoregressions (VAR) and an instrumental variable estimator. The main findings are: first, that the firm births equation has a two-year lag structure, which means that firm deaths cause firm births, and firm births cause subsequent births following two-year lags; and second, that according to the firm deaths equation, which has a one-year lag structure, firm births do not cause firm deaths, but firm deaths cause subsequent deaths. A further finding is that the use of the ordinary least-squares estimator produces inconsistent, and clearly different results from those produced by the instrumental variable estimator. Copyright 1998 by Kluwer Academic Publishers

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  • Kangasharju, Aki & Moisio, Antti, 1998. "Births-Deaths Nexus of Firms: Estimating VAR with Panel Data," Small Business Economics, Springer, vol. 11(4), pages 303-313, December.
    • Handle: RePEc:kap:sbusec:v:11:y:1998:i:4:p:303-13
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    Citations

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    Cited by:

    1. Jong-Rong Chen & Ying-Tang Huang & Wen-Cheng Lu, 2008. "Dynamic Interrelation of Births and Deaths: Evidence from Plant Level Data," Economics Bulletin, AccessEcon, vol. 12(18), pages 1-7.
    2. Marcelo Resende & Eduardo P. Ribeiro & Rodrigo Zeidan, 2015. "Dynamic Entry and Exit Linkages in the Brazilian Manufacturing Industry: An Econometric Investigation," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 22(3), pages 379-392, November.
    3. Kristina Nyström, 2007. "Interdependencies in the Dynamics of Firm Entry and Exit," Journal of Industry, Competition and Trade, Springer, vol. 7(2), pages 113-130, June.
    4. repec:rre:publsh:v:35:y:2005:i:3:p:246-65 is not listed on IDEAS
    5. Lashitew, Addisu A., 2017. "The Uneven Effect of Financial Constraints: Size, Public Ownership, and Firm Investment in Ethiopia," World Development, Elsevier, vol. 97(C), pages 178-198.
    6. Edeoba William Edobor & Maria I. Marshall, 2021. "Earth, wind, water, fire and man: How disasters impact firm births in the USA," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 107(1), pages 395-421, May.
    7. Aki Kangasharju, 1998. "Regional variation in firm formation: Panel and cross-sectional data evidence from Finland," ERSA conference papers ersa98p134, European Regional Science Association.

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