Papers Containing Keywords(s): 'downturn'
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Viewing papers 1 through 9 of 9
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Working PaperBusiness Dynamics Statistics for Single-Unit Firms
December 2022
Working Paper Number:
CES-22-57
The Business Dynamics Statistics of Single Unit Firms (BDS-SU) is an experimental data product that provides information on employment and payroll dynamics for each quarter of the year at businesses that operate in one physical location. This paper describes the creation of the data tables and the value they add to the existing Business Dynamics Statistics (BDS) product. We then present some analysis of the published statistics to provide context for the numbers and demonstrate how they can be used to understand both national and local business conditions, with a particular focus on 2020 and the recession induced by the COVID-19 pandemic. We next examine how firms fared in this recession compared to the Great Recession that began in the fourth quarter of 2007. We also consider the heterogenous impact of the pandemic on various industries and areas of the country, showing which types of businesses in which locations were particularly hard hit. We examine business exit rates in some detail and consider why different metro areas experienced the pandemic in different ways. We also consider entry rates and look for evidence of a surge in new businesses as seen in other data sources. We finish by providing a preview of on-going research to match the BDS to worker demographics and show statistics on the relationship between the characteristics of the firm's workers and outcomes such as firm exit and net job creation.View Full Paper PDF
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Working PaperCyclical Worker Flows: Cleansing vs. Sullying
May 2021
Working Paper Number:
CES-21-10
Do recessions speed up or impede productivity-enhancing reallocation? To investigate this question, we use U.S. linked employer-employee data to examine how worker flows contribute to productivity growth over the business cycle. We find that in expansions high-productivity firms grow faster primarily by hiring workers away from lower-productivity firms. The rate at which job-to-job flows move workers up the productivity ladder is highly procyclical. Productivity growth slows during recessions when this job ladder collapses. In contrast, flows into nonemployment from low productivity firms disproportionately increase in recessions, which leads to an increase in productivity growth. We thus find evidence of both sullying and cleansing effects of recessions, but the timing of these effects differs. The cleansing effect dominates early in downturns but the sullying effect lingers well into the economic recovery.View Full Paper PDF
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Working PaperFirm Dynamics, Persistent Effects of Entry Conditions, and Business Cycles
January 2017
Working Paper Number:
CES-17-29
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.View Full Paper PDF
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Working PaperSlow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News
January 2017
Working Paper Number:
CES-17-15
Concave hiring rules imply that firms respond more to bad shocks than to good shocks. They provide a united explanation for several seemingly unrelated facts about employment growth in macro and micro data. In particular, they generate countercyclical movement in both aggregate conditional 'macro' volatility and cross-sectional 'micro' volatility as well as negative skewness in the cross section and in the time series at different level of aggregation. Concave establishment level responses of employment growth to TFP shocks estimated from Census data induce significant skewness, movements in volatility and amplification of bad aggregate shocks.View Full Paper PDF
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Working PaperFirm Leverage, Consumer Demand, and Employment Losses during the Great Recession
January 2017
Working Paper Number:
CES-17-01
We argue that firms' balance sheets were instrumental in the propagation of consumer demand shocks during the Great Recession. Using establishment-level data, we show that establishments of more highly levered firms exhibit a significantly larger decline in employment in response to a drop in consumer demand. These results are not driven by firms being less productive, having expanded too much prior to the Great Recession, or being generally more sensitive to fluctuations in either aggregate employment or house prices. At the county level, we find that counties with more highly levered firms experience significantly larger job losses in response to county-wide consumer demand shocks. Thus, firms' balance sheets also matter for aggregate employment. Our research suggests a possible role for employment policies that target firms directly besides conventional stimulus.View Full Paper PDF
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Working PaperWhere Has All the Skewness Gone? The Decline in High-Growth (Young) Firms in the U.S.
November 2015
Working Paper Number:
CES-15-43
The pace of business dynamism and entrepreneurship in the U.S. has declined over recent decades. We show that the character of that decline changed around 2000. Since 2000 the decline in dynamism and entrepreneurship has been accompanied by a decline in high-growth young firms. Prior research has shown that the sustained contribution of business startups to job creation stems from a relatively small fraction of high-growth young firms. The presence of these high-growth young firms contributes to a highly (positively) skewed firm growth rate distribution. In 1999, a firm at the 90th percentile of the employment growth rate distribution grew about 31 percent faster than the median firm. Moreover, the 90-50 differential was 16 percent larger than the 50-10 differential reflecting the positive skewness of the employment growth rate distribution. We show that the shape of the firm employment growth distribution changes substantially in the post-2000 period. By 2007, the 90-50 differential was only 4 percent larger than the 50-10, and it continued to exhibit a trend decline through 2011. The reflects a sharp drop in the 90th percentile of the growth rate distribution accounted for by the declining share of young firms and the declining propensity for young firms to be high-growth firms.View Full Paper PDF
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Working PaperREALLOCATION IN THE GREAT RECESSION: CLEANSING OR NOT?
August 2013
Working Paper Number:
CES-13-42
The high pace of output and input reallocation across producers is pervasive in the U.S. economy. Evidence shows this high pace of reallocation is closely linked to productivity. Resources are shifted away from low productivity producers towards high productivity producers. While these patterns hold on average, the extent to which the reallocation dynamics in recessions are 'cleansing' is an open question. That is, are recessions periods of increased reallocation that move resources away from lower productivity activities towards higher productivity uses? It could be recessions are times when the opportunity cost of time and resources are low implying recessions will be times of accelerated productivity enhancing reallocation. Prior research suggests the recession in the early 1980s is consistent with an accelerated pace of productivity enhancing reallocation. Alternative hypotheses highlight the potential distortions to reallocation dynamics in recessions. Such distortions might arise from many factors including, for example, distortions to credit markets. We find that in post-1980 recessions prior to the Great Recession, downturns are periods of accelerated reallocation that is even more productivity enhancing than in normal times. In the Great Recession, we find the intensity of reallocation fell rather than rose (due to the especially sharp decline in job creation) and the reallocation that did occur was less productivity enhancing than in prior recessions.View Full Paper PDF
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Working PaperDeclines in Employer Sponsored Coverage Between 2000 and 2008: Offers, Take-Up, Premium Contributions, and Dependent Options
September 2010
Working Paper Number:
CES-10-23
Even before the current economic downturn, rates of employer-sponsored insurance (ESI) declined substantially, falling six percentage points between 2000 and 2008 for nonelderly Americans. During a previously documented decline in ESI, from 1987 to 1996, the fall was found to be the result of a reduction in enrollment or 'take-up' of offered coverage and not a decline in employer offer/eligibility rates. In this paper, we investigate the components of the more recent decline in ESI coverage by firm size, using data from the MEPS-IC, a large nationally representative survey of employers. We examine changes in offer rates, eligibility rates and take-up rates for coverage, and include a new dimension, the availability of and enrollment in dependent coverage. We investigate how these components changed for employers of different sizes and find that declining coverage rates for small firms were due to declines in both offer and take-up rates while declining rates for large firms were due to declining enrollment in offered coverage. We also find a decrease in the availability of dependent coverage at small employers and a shift towards single coverage across employers of all sizes. Understanding the components of the decline in coverage for small and large firms is important for establishing the baseline for observing the effects of the current economic downturn and the implementation of health insurance reform.View Full Paper PDF
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Working PaperWhy Are Plant Deaths Countercyclical: Reallocation Timing or Fragility?
November 2006
Working Paper Number:
CES-06-24
Because plant deaths destroy specific capital with large local economic impacts and potentially important macroeconmic effects, understanding the causes of deaths and, in particular, why they are concentrated in cyclical downturns, is important. The reallocationtiming hypothesis posits that plants suffering adverse permanent demand/productivity shocks delay shutdowns until cyclical downturns when plant capacity is less valuable, while the fragility hypothesis posits that shutdowns occur in downturns because the option value of maintaining the plant through low profitability periods is too small. I show that the effect that a plant's specific capital has on the timing of plant deaths differs across these two hypotheses and then use this insight to test the hypotheses' relative importance. I find that fragility is the dominant cause of the countercyclical behavior of plant deaths. This suggests that the endogenous destruction of capital is likely an important amplification and propagation mechanism for cyclical shocks and that stabilization policies have the benefit of reduced capital destruction.View Full Paper PDF
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