Events at CERGE-EI

Petr Sedláček, Ph.D.

University of Oxford, United Kingdom

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Authors: Benjamin W. Pugsley, Petr Sedláček, and Vincent Sterk

Abstract: Only half of all startups survive past the age of five and surviving businesses grow at vastly different speeds. Using micro data on employment in the population of U.S. businesses, we estimate that the lion’s share of these differences is driven by ex-ante heterogeneity across firms, rather than by ex-post shocks. Using a macroeconomic model with firm dynamics, we then study how ex-ante differences shape the distribution of firm size, “up-or-out” dynamics, and the associated gains in aggregate output. “Gazelles”—a small subset of startups with particularly high growth potential—emerge as key drivers of these outcomes. Analyzing changes in the distribution of ex-ante firm heterogeneity over time reveals that the birth rate and growth potential of gazelles has declined, creating substantial aggregate losses.

Keywords: Firm Dynamics, Startups, Macroeconomics, Administrative Data

JEL Codes: D22, E23, E24
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Full Text:  “The Nature of Firm Growth”