CREAT: Census Research Exploration and Analysis Tool

Firm Dynamics, Persistent Effects of Entry Conditions, and Business Cycles

January 2017

Written by: Sara Moreira

Working Paper Number:

CES-17-29

Abstract

This paper examines how the state of the economy when businesses begin operations affects their size and performance over the lifecycle. Using micro-level data that covers the entire universe of businesses operating in the U.S. since the late 1970s, I provide new evidence that businesses born in downturns start on a smaller scale and remain smaller over their entire lifecycle. In fact, I find no evidence that these differences attenuate even long after entry. Using new data on the productivity and composition of startup businesses, I show that this persistence is related to selection at entry and demand-side channels.

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:
demand, market, estimating, sale, growth, entrepreneurial, startup, proprietorship, entrepreneur, business startups, entrepreneurship, recession, employment growth, trend, economically, revenue, gdp, decline, recessionary, downturn

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:
National Science Foundation, National Bureau of Economic Research, Bureau of Economic Analysis, County Business Patterns, Federal Reserve Bank, Census Bureau Longitudinal Business Database, University of Chicago, Longitudinal Business Database, Employer Identification Numbers, Research Data Center, North American Industry Classification System, Census Bureau Business Register, Core Based Statistical Area, Kauffman Foundation, Chicago RDC, Business Dynamics Statistics, International Trade Research Report

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