ENTRY AND EXIT, CYCLES, AND PRODUCTIVITY GROWTH

This paper examines the impact of cycles on long-term growthin the presence of entry and exit of firms It is argued thatwhereas mild fluctuations may be beneficial for growth, moresevere fluctuations will be detrimental for growth The essentialpoint is whether recessions go beyond the point that triggers(large-scale) exit of firms Mild fluctuations may have a positiveeffect through the intertemporal substitution between productionand productivity improving activities Severe fluctuations, however,which lead to exit of firms, cause losses of knowledge and skillsduring recessions, and are therefore bad for long-term growth