FirmDynamicsinDevelopingCountries1 UfukAkcigit UniversityofChicago&NBER ConferenceonEconomicGrowth-July10,2015 1BasedonajointworkwithHarunAlp(UPenn)andMichaelPeters(Yale) UfukAkcigit(UofChicagoandNBER) FirmDynamicsinDevelopingCountries July10,2015 1 Going from micro-to-macro is crucial. The back-and-forth dialogue between data and theory is important. Background Understanding the growth process requires a good understanding of micro players (firms & entrepreneurs) of the macroeconomy. UfukAkcigit(UofChicagoandNBER) FirmDynamicsinDevelopingCountries July10,2015 2 The back-and-forth dialogue between data and theory is important. Background Understanding the growth process requires a good understanding of micro players (firms & entrepreneurs) of the macroeconomy. Going from micro-to-macro is crucial. UfukAkcigit(UofChicagoandNBER) FirmDynamicsinDevelopingCountries July10,2015 2 Background Understanding the growth process requires a good understanding of micro players (firms & entrepreneurs) of the macroeconomy. Going from micro-to-macro is crucial. The back-and-forth dialogue between data and theory is important. UfukAkcigit(UofChicagoandNBER) FirmDynamicsinDevelopingCountries July10,2015 2 What is Our Research Approach? Start with empirical regularities in the micro data. Motivated by those regularities, construct a general equilibrium theory of firm dynamics and aggregate growth. Estimate the structural parameters of the model using micro-level data. Conduct counterfactual experiments. UfukAkcigit(UofChicagoandNBER) FirmDynamicsinDevelopingCountries July10,2015 3 Motivation Recent literature: Firm dynamics in poor countries show striking differences to those of rich countries UfukAkcigit(UofChicagoandNBER) FirmDynamicsinDevelopingCountries July10,2015 4 Hsieh and Klenow (2014) Figure(cid:2)1:(cid:2)(cid:2)Plant(cid:2)Employment(cid:2)by(cid:2)Age(cid:2)in(cid:2)the(cid:2)Cross(cid:3)Section(cid:2) (cid:2) 8 =1) 4 US 5 < e g Mexico A nt ( 2 e m y o pl m E 1 India 1/2 <5 5-9 10-14 15-19 20-24 25-29 30-34 35-39 >=40 Age Sources:(cid:2)1994(cid:3)1995(cid:2)ASI(cid:3)NSS(cid:2)(India),(cid:2)2003(cid:2)Economic(cid:2)Census(cid:2)(Mexico),(cid:2)and(cid:2)2002(cid:2)Manufacturing(cid:2)Census(cid:2)(U.S.). UfukAkcigit(UofChicagoandNBER) FirmDynamicsinDevelopingCountries July10,2015 5 Hsieh and Klenow (2014) Figure(cid:2)1:(cid:2)(cid:2)Plant(cid:2)Employment(cid:2)by(cid:2)Age(cid:2)in(cid:2)the(cid:2)Cross(cid:3)Section(cid:2) (cid:2) 8 =1) 4 US 5 < e g Mexico A nt ( 2 e m y o pl m E 1 India 1/2 <5 5-9 10-14 15-19 20-24 25-29 30-34 35-39 >=40 Age Sources:(cid:2)1994(cid:3)1995(cid:2)ASI(cid:3)NSS(cid:2)(India),(cid:2)2003(cid:2)Economic(cid:2)Census(cid:2)(Mexico),(cid:2)and(cid:2)2002(cid:2)Manufacturing(cid:2)Census(cid:2)(U.S.). UfukAkcigit(UofChicagoandNBER) FirmDynamicsinDevelopingCountries July10,2015 5 The expanding firms in India While the average life-cycle is flat, some Indian firms manage to grow: 3.5 3 tn2.5 e m y o lpm 2 E n a e M1.5 1 Mean 95% Confidence Interval <5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 40> Age UfukAkcigit(UofChicagoandNBER) FirmDynamicsinDevelopingCountries July10,2015 6 ASIvsNSS FamilyFirms The stagnant firms in India Extra ... but aggregate importance of tiny producers stays stubbornly high 1 0.8 stn e m h0.6 silb a tsE fo e0.4 ra h S 0.2 India 0 0-5 6-10 11-15 16-20 21-25 26+ Age UfukAkcigit(UofChicagoandNBER) FirmDynamicsinDevelopingCountries July10,2015 7