The Resource Firm heterogeneity and macroeconomic performance, Markus Poschke

Firm heterogeneity and macroeconomic performance, Markus Poschke

Label
Firm heterogeneity and macroeconomic performance
Title
Firm heterogeneity and macroeconomic performance
Statement of responsibility
Markus Poschke
Creator
Contributor
Subject
Language
eng
Summary
The regulation of entry and aggregate productivity Euro Area economies have lower firm turnover rates, lower total factor and labor productivity, and higher capital intensity than the Unites States. I argue that differences in entry cost contribute to this pattern by affecting firms' technology choice. Introducing technology choice into a standard heterogeneous firm model, small differences in administrative entry cost suffice to explain 10-20% of differences in total factor productivity and the capital-output ratio. The productivity difference arises because higher equilibrium capital intensity acts as an entry barrier and protects low-productivity incumbents. Both firm heterogeneity and technology choice are crucial for strengthening results compared to previous studies. 2 Employment protection, firm selection, and growth This paper analyzes the effect of ring costs on aggregate productivity growth. For this purpose, a model of endogenous growth through selection and imitation is developed. It is consistent with recent evidence on firm dynamics and on the importance of reallocation for productivity growth. In the model, growth is driven by selection among heterogeneous incumbent firms, and is sustained as entrants imitate the best incumbents. In this framework, firing costs not only induce misallocation of labor, but also affect growth by affecting firms' exit decisions. Importantly, charging firing costs only to continuing firms raises growth by promoting selection. Also charging them to exiting firms is akin to an exit tax, hampers selection, and reduces growth { by 0.1 percentage points in a calibrated version of the model. With job turnover very similar in the two settings, this implies that the treatment of exiting firms matters for welfare. In addition, the impact on growth rates is larger in sectors where firms face larger idiosyncratic shocks, as in services. This fits evidence that recent EU-US growth rate differences are largest in these sectors and implies that firing costs can play a role here. A brief empirical analysis of the impact of firing costs on the size of exiting firms supports the model's conclusions. 3 The labor market, the decision to become an entrepreneur, and the firm size distribution Why do some people become entrepreneurs, and how do labor markets affect this choice? This paper addresses this question using a matching model with occupational choice and heterogeneity in both ability as a worker and ex ante unknown productivity of firm start-ups. Key effects are the following: labor market conditions affect incentives to start firms differently for workers and the unemployed, with repercussions on aggregate productivity; and they affect the expected value of firm creation due to the possibility of failure. These effects go beyond the standard impact of labor market conditions on firms' employment policy and value. The correlation of observed productive ability and potential productivity significantly shapes the firm size distribution, suggesting that the empirical correlation is positive but far from perfect. Finally, the model allows for a comparatively flexible lower tail of the firm size distribution and can explain the existence and persistence of small, lowproductivity firms with low profits: their owners have low outside options in the labor market
Member of
Cataloging source
IT-FiEUI
http://library.link/vocab/creatorName
Poschke, Markus
Date time place
Defence date: 7 December 2007
Dissertation note
Thesis (Ph. D.)--European University Institute (ECO), 2007.
Illustrations
illustrations
Index
no index present
Literary form
non fiction
Nature of contents
theses
http://library.link/vocab/relatedWorkOrContributorName
European University Institute
Series statement
  • EUI PhD theses
  • EUI theses
http://library.link/vocab/subjectName
  • Industrial efficiency
  • Macroeconomics
Label
Firm heterogeneity and macroeconomic performance, Markus Poschke
Instantiates
Publication
Note
Examining board: Prof. Omar Licandro, EUI, Supervisor ; Prof. Salvador Ortigueira, EUI ; Prof. Russell Cooper, University of Texas at Austin ; Prof. Jaume Ventura, CREI, Universitat Pompeu Fabra
Bibliography note
Includes bibliographical references
Carrier category
volume
Carrier category code
  • nc
Carrier MARC source
rdacarrier.
Content category
text
Content type code
  • txt
Content type MARC source
rdacontent.
Control code
FIEb13865201
Dimensions
30 cm.
Extent
vi, 113 pages
Media category
unmediated
Media MARC source
rdamedia.
Media type code
  • n
Other physical details
illustrations
System control number
(OCoLC)1038723341
Label
Firm heterogeneity and macroeconomic performance, Markus Poschke
Publication
Note
Examining board: Prof. Omar Licandro, EUI, Supervisor ; Prof. Salvador Ortigueira, EUI ; Prof. Russell Cooper, University of Texas at Austin ; Prof. Jaume Ventura, CREI, Universitat Pompeu Fabra
Bibliography note
Includes bibliographical references
Carrier category
volume
Carrier category code
  • nc
Carrier MARC source
rdacarrier.
Content category
text
Content type code
  • txt
Content type MARC source
rdacontent.
Control code
FIEb13865201
Dimensions
30 cm.
Extent
vi, 113 pages
Media category
unmediated
Media MARC source
rdamedia.
Media type code
  • n
Other physical details
illustrations
System control number
(OCoLC)1038723341

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