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Who killed business dynamism in the U.S.?

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  • Bianca Barbaro
  • Giorgio Massari
  • Patrizio Tirelli

Abstract

We offer a new interpretation of the long-term dynamics in the U.S. firm entry rate. Its decline was the consequence of a persistent combination of adverse (favorable) productivity shocks to potential entrants(incumbents), while the long-term increase in price markups did not play a significant role. In spite of the "Schumpeterian" structure of our model, not all recessions had a "cleansing" effect, because the combination of shocks associated to the specific episodes had markedly different effects on the dispersion of firms' efficiency. Finally, the extensive margin allows to rationalize the procyclical pattern of TFP growth and its long-term decline.

Suggested Citation

  • Bianca Barbaro & Giorgio Massari & Patrizio Tirelli, 2022. "Who killed business dynamism in the U.S.?," Working Papers 494, University of Milano-Bicocca, Department of Economics, revised Aug 2022.
    • Handle: RePEc:mib:wpaper:494
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    More about this item

    Keywords

    firm entry rate; endogenous firm dynamics; productivity; business cycle; Bayesian estimation; DSGE.;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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