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The Impact of Business Cycle Conditions on Firm Dynamics and Composition
Published online by Cambridge University Press: 29 March 2023
Abstract
This paper estimates the causal impact of short-term aggregate fluctuations in Egypt, 1911–48, using global cotton price shocks. Firm entry was procyclical, and exit was acyclical. There were persistent differences between cohorts over the cycle; expansionary cohorts were of lower quality. The evidence supports models of firm entry with ex-ante heterogeneity. The findings highlight the extensive margin of entry as the primary adjustment mechanism. As a result, recessions had a strong “isolation” effect. This nature of firm entry amplified and propagated temporary price shocks.
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- © The Author(s), 2023. Published by Cambridge University Press on behalf of the Economic History Association
Footnotes
I am grateful to Lint Barrage, Ryan Decker, Price Fishback, Amanda Gregg, Timothy Guinnane, Philip Hoffman, Naomi Lamoreaux, Christopher Meissner, Steven Nafziger, Jean-Laurent Rosenthal, Mohamed Saleh, Kieran Walsh, and the participants of the Caltech, UC Davis, Middlebury College, and Williams College economics workshops, as well as the Annual Meeting of the Economic History Association. I thank Laura D. Taylor for providing excellent research assistance and the staff of Yale University Lillian Goldman Law Library, Bibliothèque nationale de France, and the British Library for help in locating sources. I am also grateful to Roger Bilboul and David Lisbona for kindly sharing their private collection. This paper is supported by the National Science Foundation under grant NSF SES 1559273. Replication materials for this study are available at Artunç (2023).
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