Economics Program and Dean of the College Present
The Impact of Business Cycle Conditions on Firm Dynamics and Composition: Enterprise Entry and Exit in Egypt, 1911–48
Thursday, January 31, 2019
Olin Humanities, Room 102
5:00 pm – 6:00 pm EST/GMT-5
5:00 pm – 6:00 pm EST/GMT-5
Cihan Artunç
Assistant Professor of Economics
University of Arizona
Assistant Professor of Economics
University of Arizona
This paper explores how macroeconomic conditions affect firm dynamics in Egypt between 1911 and 1948 by constructing an extensive dataset of all companies ever founded in this period. By exploiting Egyptian economy's specialization in cotton exports, Artunç uses fluctuations in the world price of cotton to identify the direct impact of the business cycle on firm entry, exit, and growth. The analysis shows that growth occurred primarily at the extensive margin. Firm entry was procyclical but exit and growth were both acyclical. The new evidence reveals cyclical selection into entry. Booms systematically selected low-quality entrants, which were smaller, less likely to grow after entry, and frailer than other cohorts. Bust cohorts were larger, more likely to grow, and more robust. The quality differences were persistent over the firms’ life cycles. These new findings support a theory of firm dynamics with ex ante heterogeneous firms, permanent productivity differences between cohorts, and economic adjustment through the extensive margin of entry.
For more information, call 845-758-7075, or e-mail [email protected].
Time: 5:00 pm – 6:00 pm EST/GMT-5
Location: Olin Humanities, Room 102