View metadata

dc.titleFirm Exit during Recessions
dc.contributor.authorAyres, João
dc.contributor.authorRaveendranathan, Gajendran
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.coverageUnited States
dc.date.available2020-04-13T00:00:00
dc.date.issue2020-04-13T00:00:00
dc.description.abstractWe analyze a general equilibrium model of firm dynamics to study the effects of shocks to productivity, labor wedge, and collateral constraint (credit shock) on firm exit. We find that only the credit shock increases firm exit. This result is robust to the magnitude of shocks and different model specifications. Calibrating the model to match the behavior of output, employment, and firm debt during the Great Recession (2007-2009) in the United States, we find that the credit shock accounts for the observed rise in firm exit and its concentration among young firms. Furthermore, it accounts for 20 percent of the drop in output and employment.
dc.format.extent33
dc.identifier.doihttp://dx.doi.org/10.18235/0002289
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Firm_Exit_during_Recessions.pdf
dc.language.isoen
dc.mediumAdobe PDF
dc.publisherInter-American Development Bank
dc.subjectWage Rate
dc.subjectCredit
dc.subjectLabor Market
dc.subjectProductivity Shock
dc.subjectFinancial Friction
dc.subjectInterest Rate
dc.subjectEconomic Recession
dc.subjectFirms Dynamics
dc.subject.jelcodeE24 - Employment • Unemployment • Wages • Intergenerational Income Distribution • Aggregate Human Capital • Aggregate Labor Productivity
dc.subject.jelcodeE32 - Business Fluctuations • Cycles
dc.subject.jelcodeD22 - Firm Behavior: Empirical Analysis
dc.subject.jelcodeD21 - Firm Behavior: Theory
dc.subject.keywordsEmployment;firm dynamics;general equilibrium model;Credit;Output
dc.typeWorking Papers
idb.identifier.pubnumberIDB-WP-01117
idb.operationRG-K1098
Return to Publication