2020/20 LEM Working Paper Series

The age distribution of business firms

Flavio Calvino, Daniele Giachini and Mattia Guerini
Firm demographics; age distribution; business dynamism.

  JEL Classifications
L11, L22, M13, M21
We investigate upon the shape and the determinants of the age distribution of business firms. By employing a novel dataset covering the population of French businesses, we highlight that a geometric law provides a reasonable approximation for the age distribution. However, relevant systematic deviations and sectoral heterogeneity appear. We develop a stochastic model of firm dynamics to explain the mechanisms behind this evidence and relate them to business dynamism. Results reveal a long-term decline in entry rates and lower survival probabilities of young firms. Our findings bear important implications for aggregate outcomes, notably employment growth.
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