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Title:Disentangling the firm growth process: evidence from a recursive panel VAR PDF Logo
Authors:Coad, Alexander
Issue Date:2007
Series/Report no.:Papers on economics and evolution 0715
Abstract:We attempt to describe the coevolution of employment growth, sales growth and growth of profits in a panel of French manufacturing firms 1996-2004. Our analysis entails ‘recursive’ panel vector autoregressions, whereby we impose the structure of employment growth leading to contemporaneous sales growth, which in turn is associated with contemporaneous growth of profits. We observe that whilst employment growth has a direct negative association with profit growth, there are indirect effects through which employment growth leads to sales growth which in turn has a large effect on profits growth. The net effect of employment growth is thus positive growth of profits. Counter to some ‘replicator dynamics’ theories of industrial development, profit growth is not followed by much subsequent growth of employment.
Subjects:Firm Growth
Panel VAR
Recursive VAR
Employment Growth
Industrial Dynamics
JEL:L20
L25
Document Type:Working Paper
Appears in Collections:Papers on Economics and Evolution, MPI für Ökonomik

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