Firm growth dynamics across countries: Evidence from a new database
We present a newly-developed database that measures the distribution of firm growth across 12 countries, building on confidential microdata from business registers in the US and Europe that cover the universe of firms.
Nesta Working Paper 16/03
Issued: December 2016
Keywords: growth, firm dynamics, productivity
JEL codes: D22, L11, O49
We present a newly-developed database that measures the distribution of firm growth across 12 countries, building on confidential microdata from business registers in the US and Europe that cover the universe of firms. We document not just average growth but also the growth rate for all the percentiles of the growth distribution, breaking it down by size, sector and age.
We identify a number of stylised facts that hold across countries, but also show that there are significant differences in their growth distributions. Firms in the US grow and shrink more rapidly than in Europe, which has a much larger share of static firms, for which employment does not vary much (up or down). Finally, we find that a more dynamic growth distribution is associated with faster productivity growth, and this relationship becomes stronger as countries converge to the global technology frontier (specifically, a 5pp higher share of static firms is associated with 1pp lower productivity growth).
Albert Bravo-Biosca, Nesta and Barcelona GSE
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