In Search of Lost Time: Firm Vintage and Macroeconomic Dynamics

Masashige Hamano and Toshihiro Okubo

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: This paper attempts to reproduce the past landscape of the economy with the help of evidence and structural models. For that purpose, we built a theoretical model consisting of endogenous firm entry and firm selection. Given the distribution of firm age and firm sales that we see today, we simulated age-specific technologies and fixed costs for operation. With these simulated parameters, we then reestablished the macroeconomic dynamics of each historical firm. With Japanese data from over 126 years, despite the massive presence of firms created after the Second World War until the oil crisis in the 1970s, we found that these historical firms show relatively low productivity. Old historical firms are subject to high fixed costs and high productivity. Finally, we demonstrated that our counterfactual fixed costs dramatically change the landscape of historical firms, as well as their characteristics.

Pages: 42 pages
Date: 2021-03
New Economics Papers: this item is included in nep-bec, nep-dge, nep-his, nep-mac and nep-sbm
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:21015

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