Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jul, 2022, Volume 90, Issue 4

From Population Growth to Firm Demographics: Implications for Concentration, Entrepreneurship and the Labor Share

https://doi.org/10.3982/ECTA18012
p. 1879-1914

Hugo Hopenhayn, Julian Neira, Rish Singhania

In the U.S., large firms now account for a greater share of economic activity, new firms are being created at slower rates, and workers are receiving a smaller share of GDP. Changes in population growth provide a unified quantitative explanation. A decrease in population growth lowers firm entry rates, shifting the firm‐age distribution toward older firms. Firm aging accounts for (i) the concentration of employment in large firms, (ii) and trends in average firm size and exit rates, key determinants of firm entry rates. Feedback effects from firm demographics generate two‐thirds of the effect. Prior to the decrease, entry rates rose steadily reflecting the earlier baby boom. The glut of firms due to the baby boom lead to rich transitional dynamics within the feedback effects, accounting for more than half the total change. Baby boom induced changes in the firm‐age distribution provide a driving force for the post‐WWII rise and fall in the aggregate labor share. Ignoring changes in population growth attributes all the long run decline in entry rates to a decrease in firm exit rates, which in reality have been only one‐third as large.


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Supplemental Material

Supplement to "From Population Growth to Firm Demographics: Implications for Concentration, Entrepreneurship and the Labor Share"

Hugo Hopenhayn, Julian Neira, and Rish Singhania

This online appendix contains material not found within the manuscript.

Supplement to "From Population Growth to Firm Demographics: Implications for Concentration, Entrepreneurship and the Labor Share"

Hugo Hopenhayn, Julian Neira, and Rish Singhania

This zip file contains the replication files for the manuscript.