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Manchester Grand Hyatt, Mission Beach B
Hosted By:
Society of Government Economists
match with better startups, creating a synergistic effect. An endogenous growth model, where venture capitalists provide both expertise and financing to business startups, is constructed to match these facts. The degree of assortative matching and the taxation of VC-backed startups are important for growth.
Firms, Growth and Concentration
Paper Session
Saturday, Jan. 4, 2020 8:00 AM - 10:00 AM (PDT)
- Chair: Chad Syverson, University of Chicago
Diverging Trends in National and Local Concentration
Abstract
Using U.S. NETS data, we present evidence that the positive trend observed in national product market concentration between 1990 and 2014 becomes a negative trend when we focus on measures of local concentration. We document diverging trends for several geographic definitions of local markets. SIC 8 industries with diverging trends are pervasive across sectors. In these industries, top firms have contributed to the amplification of both trends. When a top firm opens a plant, local concentration declines and remains lower for at least 7 years. Our findings, therefore, reconcile the increasing national role of large firms with falling local concentration, and a likely more competitive local environment.Synergizing Ventures
Abstract
Venture capital and growth are examined both empirically and theoretically. Empirically, VC-backed startups have higher early growth rates and patenting levels than non-VC-backed ones. Venture capitalists increase a startup’s likelihood of reaching the right tails of firm size and innovation distributions. Furthermore, there is positive assortative matching: better venture capitalistsmatch with better startups, creating a synergistic effect. An endogenous growth model, where venture capitalists provide both expertise and financing to business startups, is constructed to match these facts. The degree of assortative matching and the taxation of VC-backed startups are important for growth.
Firm Growth through New Establishments
Abstract
This paper analyzes the distribution and growth of firm-level employment along two margins: the extensive margin (the number of establishments in a firm) and the intensive margin (the number of workers per establishment in a firm). We utilize administrative datasets to document the behavior of these two margins in relation to changes in the U.S. firm-size distribution. In the cross section, we find the firm-size distribution, as well as both extensive and intensive margins, exhibits a fat tail. The increase in average firm size between 1990 and 2014 is primarily driven by an expansion along the extensive margin, particularly in very large firms. We develop a tractable general equilibrium growth model with two types of innovations: external and internal. External innovation leads to the extensive margin of firm growth, and internal innovation leads to intensive-margin growth. The model generates fat-tailed distributions in firm size, establishment size, and the number of establishments per firm. We estimate the model to uncover the fundamental forces that caused the distributional changes from 1995 to 2014. We find the change in the external innovation cost and the decline in establishment exit rates are the largest contributors to the increase in the number of establishments per firm.Discussant(s)
Dominic Smith
,
U.S. Bureau of Labor Statistics
Ryan A. Decker
,
Federal Reserve Board
Devesh Raval
,
Federal Trade Commission
Sina Ates
,
Federal Reserve Board
JEL Classifications
- E0 - General
- D0 - General