Dent, Robert C. Karahan, Fatih Pugsley, Benjamin Şahin, Ayşegül
Year of Publication:
Staff Report, Federal Reserve Bank of New York 762
The U.S. economy has been going through a striking structural transformation - the secular reallocation of employment across sectors - over the past several decades. We propose a decomposition framework to assess the contributions of various margins of firm dynamics to this shift. Using firm-level data, we find that at least 50 percent of the adjustment has been taking place along the entry margin, owing to sectors receiving shares of start-up employment that differ from their overall employment shares. The rest is mostly the result of life cycle differences across sectors. Declining overall entry has a small but growing effect of dampening structural transformation.