Creator: Luttmer, Erzo G. J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 748 Abstract:
Most firms begin very small, and large firms are the result of typically decades of persistent growth. This growth can be understood as the result of some form of capital accumulation-organization capital. In the US, the distribution of firm size k has a right tail only slightly thinner than 1/k. This means that most capital accumulation must be accounted for by incumbent fi rms. This paper describes a range of circumstances in which this implies aggregate convergence rates that are only about half of what they are in the standard Cass-Koopmans economy. Through the lens of the models described in this paper, the aftermath of the Great Recession of 2008 is unsurprising if the events of late 2008 and early 2009 are interpreted as a destruction of organization capital.
关键词: Slow recoveries, Firm size distribution, Zipf's law, and Business cycles 学科: E32 - Business Fluctuations; Cycles and L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Creator: Luttmer, Erzo G. J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 699 Abstract:
This paper adds imitation by incumbent firms, and not just by new entrants, to the model of selection and growth developed in Luttmer . Noisy firm-level innovation and imitation give rise to a long-run growth rate that exceeds the average rate at which individual firms innovate. It can be shown, in simple examples, that the economy converges to a long-run balanced growth path from compactly supported initial productivity distributions. The right tail of the stationary distribution of de-trended productivity is approximately Pareto. The tail index of this distribution depends on the rate at which incumbents are able to imitate only indirectly, through general equilibrium effects of this parameter on the equilibrium growth rate.
关键词: Technology diffusion, Size distribution of firms, and Endogenous growth 学科: O33 - Technological Change: Choices and Consequences; Diffusion Processes and L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Creator: Luttmer, Erzo G. J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 657 Abstract:
Given a common technology for replicating blueprints, high-quality blueprints will be replicated more quickly than low-quality blueprints. If quality begets quality, and firms are identified with collections of blueprints derived from the same initial blueprint, then, along a balanced growth path, Gibrat’s Law holds for every type of firm. A firm size distribution with the thick right tail observed in the data can then arise only when the number of blueprints in the economy grows over time, or else firms cannot grow at a positive rate on average. But when calibrated to match the observed firm entry rate and the right tail of the size distribution, this model implies that the median age among firms with more than 10,000 employees is about 750 years. The problem is Gibrat’s Law. If the relative quality of a firm’s blueprints depreciates as the firm ages, then the firm’s growth rate slows down over time. By allowing for rapid and noisy initial growth, this version of the model can explain high observed entry rates, a thick-tailed size distribution, and the relatively young age of large U.S. corporations.
关键词: Gibrat's Law, Firm age and size distribution, and Capital accumulation 学科: L11 - Production, Pricing, and Market Structure; Size Distribution of Firms and O40 - Economic Growth and Aggregate Productivity: General
Creator: Koijen, Ralph S. J. and Yogo, Motohiro Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 505 Abstract:
Liabilities ceded by life insurers to shadow reinsurers (i.e., less regulated and unrated off-balance-sheet entities) grew from $11 billion in 2002 to $364 billion in 2012. Life insurers using shadow insurance, which capture half of the market share, ceded 25 cents of every dollar insured to shadow reinsurers in 2012, up from 2 cents in 2002. Our adjustment for shadow insurance reduces risk-based capital by 53 percentage points (or 3 rating notches) and increases default probabilities by a factor of 3.5. We develop a structural model of the life insurance industry and estimate the impact of current policy proposals to limit or eliminate shadow insurance. In the counterfactual without shadow insurance, the average company using shadow insurance would raise prices by 10 to 21 percent, and annual life insurance underwritten would fall by 7 to 16 percent for the industry.
关键词: Life insurance industry, Regulatory arbitrage, Demand estimation, Capital regulation, and Reinsurance 学科: G28 - Financial Institutions and Services: Government Policy and Regulation, L51 - Economics of Regulation, L11 - Production, Pricing, and Market Structure; Size Distribution of Firms, and G22 - Insurance; Insurance Companies; Actuarial Studies
Creator: Rossi-Hansberg, Esteban and Wright, Mark L. J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 382 Abstract:
Why do growth and net exit rates of establishments decline with size? What determines the size distribution of establishments? This paper presents a theory of establishment dynamics that simultaneously rationalizes the basic facts on economy-wide establishment growth, net exit, and size distributions. The theory emphasizes the accumulation of industry-specific human capital in response to industry-specific productivity shocks. It predicts that establishment growth and net exit rates should decline faster with size and that the establishment size distribution should have thinner tails in sectors that use human capital less intensively or physical capital more intensively. In line with the theory, the data show substantial sectoral heterogeneity in U.S. establishment size dynamics and distributions, which is well explained by variation in physical capital intensity.
关键词: Zip's Law, Size Distribution of Establishments, Gibrat's Law, Establishment Dynamics, and Scale Effects 学科: L25 - Firm Performance: Size, Diversification, and Scope, L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices, and L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Creator: Boldrin, Michele and Levine, David K. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 339 Abstract:
In the modern theory of growth, monopoly plays a crucial role both as a cause and an effect of innovation. Innovative firms, it is argued, would have insufficient incentive to innovate should the prospect of monopoly power not be present. This theme of monopoly runs throughout the theory of growth, international trade, and industrial organization. We argue that monopoly is neither needed for, nor a necessary consequence of, innovation. In particular, intellectual property is not necessary for, and may hurt more than help, innovation and growth. We argue that, as a practical matter, it is more likely to hurt.
关键词: Innovation, Capital Accumulation, Trade, Intellectual Property, and Growth 学科: O47 - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence, F11 - Neoclassical Models of Trade, O34 - Intellectual Property and Intellectual Capital, L11 - Production, Pricing, and Market Structure; Size Distribution of Firms, L43 - Legal Monopolies and Regulation or Deregulation, and O31 - Innovation and Invention: Processes and Incentives
Creator: Eaton, Jonathan, Kortum, Samuel, and Kramarz, Francis Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 332 Abstract:
We examine entry across 113 national markets in 16 different industries using a comprehensive data set of French manufacturing firms. The data are unique in indicating how much each firm exports to each destination. Looking across all manufacturers: (1) Firms differ substantially in export participation, with most selling only at home; (2) The number of firms selling to multiple markets falls off with the number of destinations with an elasticity of –2.5; (3) Decomposing French exports to each destination into the size of the market and French share, variation in market share translates nearly completely into firm entry while about 60 percent of the variation in market size is reflected in firm entry. Looking within each of 16 industries we find little variation in these patterns. We propose that any successful model of trade and market structure must confront these facts.
关键词: Industrial chemistry, Furniture industry, Metals industries, International trade, Market share, Exports, Tobacco industry, Industrial machinery, ndustrial market , and Heavy industry 学科: L60 - Industry Studies: Manufacturing: General, F14 - Empirical Studies of Trade, and L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Creator: Klette, Tor Jakob and Kortum, Samuel Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 300 Abstract:
We develop a parsimonious model of innovating firms rich enough to confront firm-level evidence. It captures the dynamic behavior of individual heterogenous firms, describes the evolution of an industry with simultaneous entry and exit, and delivers a general equilibrium model of technological change. While unifying the theoretical analysis of firms, industries, and the aggregate economy, the model yields insights into empirical work on innovating firms. It accounts for the persistence over time of firms’ R&D investment, the concentration of R&D among incumbent firms, and the link between R&D and patenting. Furthermore, it explains why R&D as a fraction of revenues is strongly related to firm productivity yet largely unrelated to firm size or growth.
关键词: Birth and death processes, Firm growth, Productivity, R&D, Market structure, and Endogenous growth theory 学科: L11 - Production, Pricing, and Market Structure; Size Distribution of Firms and O31 - Innovation and Invention: Processes and Incentives
Creator: Mitchell, Matt Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 269 Abstract:
Many manufacturing industries, including the computer industry, have seen large increases in productivity growth rates and have experienced a reduction in average establishment size and a decrease in the variance of the sizes of plants. A vintage capital model is introduced where learning increases productivity on any given technology and firms choose when to adopt a new vintage. In the model, a rise in the rate of technological change leads to a decrease in both the mean and variance of the size distribution.
关键词: Productivity Growth, Plant Size, and Technological Change 学科: L60 - Industry Studies: Manufacturing: General, O30 - Innovation; Research and Development; Technological Change; Intellectual Property Rights: General, and L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Creator: Filson, Darren, 1969- and Franco, April Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 272 Abstract:
In high-tech industries, one important method of diffusion is through employee mobility: many of the entering firms are started by employees from incumbent firms using some of their former employers’ technological know-how. This paper explores the effect of incorporating this mechanism in a general industry framework by allowing employees to imitate their employers’ know-how. The equilibrium is Pareto optimal since the employees “pay” for the possibility of learning their employers’ know-how. The model’s implications are consistent with data from the rigid disk drive industry. These implications concern the effects of know-how on firm formation and survival.
关键词: Innovation, Industry Dynamics, Spinout, Research and Development, Diffusion, Techonological Change, and Rigid Disk Drive 学科: J24 - Human Capital; Skills; Occupational Choice; Labor Productivity, L11 - Production, Pricing, and Market Structure; Size Distribution of Firms, L63 - Microelectronics; Computers; Communications Equipment, and O31 - Innovation and Invention: Processes and Incentives