Dynamism Diminished: The Role of Housing Markets and Credit Conditions

Abstract

for many helpful comments. Diyue Guo and Laura Zhao provided superb research assistance. We gratefully acknowledge financial support from the Goldman Sachs Global Markets Initiative and the Ewing Marion Kauffman Foundation. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w25466.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Big data in finance and the growth of large firms

“…One of the main question in macroeconomics today is why small firms are being replaced with larger ones. Over the last three decades, the percentage of employment at firms with less than 100 employees has fallen from 40% to 35% ( Figure 1a); the annual rate of new startups has decreased from 13% to less than 8%, and the share of employment at young firms (less than 5 years) has decreased from 18% to 8% (Davis and Haltiwanger, 2015). While small firms have struggled, large firms (more than 1000 employees) have thrived: The share of the U.S. labor force they employ has risen from one quarter in the 1980s, to about a third today.…”

“…Contribution to the existing literature Our model combines features from a few disparate literatures. The topic of changes in the firm size distribution has been taken up in many recent papers, including Davis and Haltiwanger (2015), Kozeniauskas (2017), and Akcigit and Kerr (2017). In addition, a number of papers analyze how size affects the cost of capital, e.g.…”

The Persistent Employment Effects of the 2006-09 U.S. Housing Wealth Collapse

“…Apart fromMian, Rao, and Sufi (2013) andMian and Sufi (2014), the instrument has been used recently to gauge the effects of the housing cycle byStroebel and Vavra (2014) andDavis and Haltiwanger (2019).3 Specifically, we show that it is valid if, after allowing for controls, it is uncorrelated with the sensitivity of individual locations to aggregate shocks (including the housing shock). Our analysis addresses existing criticism of the instrument head on and shows that our results are robust to a wide range of stringent control schemes.…”

Entry Costs and the Macroeconomy

“…Decker et al (2015) argue that, whereas in the 1980's and 1990's declining dynamism was observed in selected sectors (notably retail), the decline was observed across all sectors in the 2000's, including the traditionally high-growth information technology sector. Davis and Haltiwanger (2019) emphasize the role of the housing market for explaining the decline. Furman (2015) shows that "the distribution of returns to capital has grown increasingly skewed and the high returns increasingly persistent" and argues that it "potentially reflects the rising influence of economic rents and barriers to competition."…”