The Rise and Fall of Labor Force Growth: Implications for Firm Demographics and Aggregate Trends

Economics

Speaker:Rish Singhania, University of Exeter
Date: Friday 30 November 2018
Time: 14.00
Location: Matrix Lecture Theatre, Building One

Further details

The US economy has undergone a number of puzzling changes since the 1970s. The business startup rate has declined from 14 to 8 percent, the aggregate firm exit rate has declined from 9 to 7 percent, the aggregate labor share has declined by 6 percentage points, and economic activity is increasingly concentrated in large firms. This paper shows that the rise and fall of labor force growth provides a unified quantitative explanation for these apparently disparate trends. We find that accounting for changes in firm demographics is crucial. The changes in labor force growth lead to changes in firm demographics, which affect aggregate trends. Quantitatively, the model accounts for most of the changes in aggregate trends.