Institutional Affiliation: NERA Economic Consulting
|Misallocation Measures: The Distortion That Ate the Residual|
with , : w24199
A large literature on misallocation and productivity has arisen in recent years, with Hsieh and Klenow (2009; hereafter HK) as its standard empirical framework. The framework’s usefulness and theoretical founding make it a valuable starting point for analyzing misallocations. However, we show this approach is sensitive to model misspecification. The model’s mapping from observed production behaviors to misallocative wedges/distortions holds in a single theoretical case, with strict assumptions required on both the demand and supply sides. We demonstrate that applying the HK methodology when there is any deviation from these assumptions will mean “distortions” recovered from the data may not be signs of inefficiency. Rather, they may simply reflect demand shifts or movements of the firm alo...
|High Growth Young Firms: Contribution to Job, Output, and Productivity Growth|
with , ,
in Measuring Entrepreneurial Businesses: Current Knowledge and Challenges, John Haltiwanger, Erik Hurst, Javier Miranda, and Antoinette Schoar, editors
Recent research shows that the job creating prowess of small firms in the U.S. is better attributed to startups and young firms that are small. But most startups and young firms either fail or don’t create jobs. A small proportion of young firms grow rapidly and they account for the long lasting contribution of startups to job growth. High growth firms are not well understood in terms of either theory or evidence. Although the evidence of their role in job creation is mounting, little is known about their life cycle dynamics, or their contribution to other key outcomes such as real output growth and productivity. In this paper, we enhance the Longitudinal Business Database with gross output (real revenue) measures. We find that the patterns for high output growth firms largely mim...