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Firm lifecycles

Laszlo Tetenyi
Nicholas Kozeniauskas
Publication Year 
The factors determining firm size and growth are central to understanding aggregate economic growth, and the design of firm-level government policies that aim to promote growth, and smooth business cycles. Motivated by this we study the relative importance of initial conditions versus post-entry shocks in determining firm outcomes, and the relative size of capital and labor market friction that firms face. Using detailed Portuguese firm data and a simple model to aid interpretation, we find that initial conditions play an important role in determining firm outcomes, and that capital market frictions are larger than labor market frictions.
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