The Impact of Business Cycle Conditions on Firm Dynamics and Composition

Abstract

This paper estimates the causal impact of short-term aggregate fluctuations in Egypt, 1911–48, using global cotton price shocks. Firm entry was procyclical, and exit was acyclical. There were persistent differences between cohorts over the cycle; expansionary cohorts were of lower quality. The evidence supports models of firm entry with ex-ante heterogeneity. The findings highlight the extensive margin of entry as the primary adjustment mechanism. As a result, recessions had a strong “isolation” effect. This nature of firm entry amplified and propagated temporary price shocks.

Job gain and job loss dynamics in the truck transportation industry

“…Likewise, what is the long-term impact on job loss rates due to firm exit for trucking firms founded during freight recessions (Terrazas, 2019) versus procyclical industry conditions (Geroski et al, 2010)? On one hand, poor industry conditions at the time of founding may cause more firms to deplete their initial resource endowments and thus increasing the hazard of exit (Levinthal, 1991), but on the other hand, procyclical founding conditions can support the creation of lower quality firms that are more likely to subsequently exit (Artunc, 2023). Such studies would advance our understanding of industry dynamics among for-hire motor carriers.…”