增长预期和企业进入的动态

GrowthexpectationsandthedynamicsoffirmentryoubiMonetaryandEconomicDepartmentAugust022JELclassification:D25,D84,E32,E62,H32,M13.Keywords:Firmentry,exit,growthexpectations,privateandpublicinvestment.NprintonlineBISWorkingPapersarewrittenbymembersoftheMonetaryandEconomiceconomists,andarepublishedbytheBank.ThepapersareonsubjectsoftopicaledinthemarethoseoftheirauthorsandnotnecessarilytheviewsoftheBIS.ThispublicationisavailableontheBISwebsite().BankforInternationalSettlements2022.Allrightsreserved.Briefexcerptsmaybereproducedortranslatedprovidedthesourceisstated.1EnisseKharroubi+July2022AbstractHowdoaggregateconditionsa§ectthedynamicsofÖrmentry?DorecessionsforcemoreÖrmsout,allowingformoreÖrmstoentersubsequently?Ordoesthisprocessrequireothercircumstancestothrive?IlookintothesequestionsusingsectoraldataonÖrmentryandexitforthemaineconomiesoftheEuroAreaover2009-2019.MymainÖndingisthatexpected,ratherthancurrent,GDPgrowthshapesthedynamicsofÖrmentry.SpeciÖcally,IÖndthatentryincreaseswithpastexitsatthesector-level,butonlywhenaggregateGDPgrowthisforecastedtobestrong.Also,withstronggrowthforecasts,pastentrydevelopmentsweightlessonthesubsequentsectoralentrydynamics.Periodsoflowentryandhighexit,canthereforebefollowedbystrongentrysubsequently,whentheeconomyisexpectedtogrowstrongly.TheseÖndingsarerobusttotheinclusionofseveralcontrols.Thisincludesthequalityofinsolvencyproceedings,Örmsíabilitytoobtaincreditorthepresenceofbarrierstoentry.Finally,IshowthatexpectationsofprivateandpublicinvestmentdrivetheimpactofgrowthexpectationsonthedynamicsofÖrmentry.JELcodes:D25,D84,E32,E62,H32,M13.Keywords:Firmentry,exit,growthexpectations,privateandpublicinvestment.*Thispaperwaspreviouslycirculatedasaninternalmemoentitled"Doexitspavethewaytoentry:asectoralanalysis".Commentsandsuggestionsfromafewcolleaguesonthisearlydraftaregratefullyacknowledged.TheviewsexpressedherearethoseoftheauthorandnotnecessarilyrepresenttheviewsoftheBIS.十BankforInternationalSettlements.Address:Centralbahnplatz2,4051BaselSwitzerland.Correspondinge-mail:enisse.kharroubi@21IntroductionFollowingtheoutbreakofthecovid-19pandemic,governmentsaroundtheglobetookextraordinarymeasurestoshieldÖrmsandhouseholdsfromtheeconomicconsequencesoftherecessionthattheworldwasabouttoface(IMF2020).Todoso,publicauthoritiesdevotedunprecedentedamountstosupportthecorporatesectorintheirrespectivejurisdictions,deployingawidearrayofpolicymeasures,fromjobretentionschemestocreditguaranteesorevenoutrightdirectcredittobusinesses.1Atthetime,therationaleforsuchwidespreadsupportwassimple:thepandemiccreatedanunprece-dentednegativeshockthatcouldprovedeadly,eventothemosthealthyandwell-managedÖrms.MorespeciÖcally,whileaÖrmíscurrentcasháowduringarecessiontendstobeagoodpredictorofitslong-runviability,thisrelationshipbrokeapartfollowingthepandemic-inducedshock,makinggovernmentsupportnecessary(Hansonetal.2020).Inaddition,theCovid-19pandemicusheredinmuchhigheruncertainty(CoeurÈ2021),leavingÖrmswiththedi¢culttaskofnavigatingarecessionwithunknownlengthanddepth.2AnotherpeculiaraspectoftheCovid-19recessionisthatitwasprimarilytheoutcomeofgovernment-imposedlockdownsandotherrestrictionmeasuresonbusinesses.3Asaresult,supportingthemosta§ectedsectorswasseenasnecessary,notleasttoensurepublicacceptanceforpoliciesthatprioritisedpublichealth.Notwithstandingthesequalitativearguments,adebategrewastotheappropriatescope,sizeandlengthofthissupport.Ontheonehand,somesuggestedthatstimuluspoliciesshouldberelativelylight,andphasedoutswiftlyastoletseverelya§ectedÖrmsexit(seeFreemanetal.2021orHodbodetal.2020).ThiswouldmakeroomfornewÖrmsñmoreproductiveandbettersuitedtonavigatetheneweconomiclandscapeñtoemergeandjump-startgrowthacrossdi§erentsectorsoftheeconomy.Ontheotherhand,proponentsofstrongpolicysupporthighlightedaggregatedemandexternalities(Gobbietal.2020).LettingÖrmsgobustcouldtriggeradversespiralsandproduceabroad-basedcontractionindemand,aswellaslarge1AccordingtotheIMFdatabaseonFiscalPolicyresponsestoCovid19,governmentsinAdvancedEconomiesspentonaverageabout12%oftheirrespectiveGDPin2020forÖnancialassistancetoÖrmsintheformofequityinjections,loansextensionsandcreditguarantees.2Barnesetal.(2021)providecomplementaryevidenceforhighuncertaintyandthedi¢cultyforgovernmentstodesignappropriatelytargetedsupport.3ThispeculiarityisanotherreasonwhyÖrmsfacingdi¢cultiesduringthepandemicmaystillbeverymuchviableinthelong-run.3scaleemploymentdestructions.Thesewouldfurtherdepressprospects,therebyleadingtoadditionalwavesofÖrmexits.Atthesametime,thescaleofpublicsupportneededtoavoidtheseadversespiralswassuchthatpolicyinterventionsneededtobetargetedtodistressedÖrmsandsectors.Otherwise,thepecuniarycosttopublicaccountscouldproveverysigniÖcant(Gourinchasetal.2020).4Assessingwhichofthesetwoviewsismorelikelytoholdempiricallyhoweverrequiresaproperunder-standingofthedynamicsofÖrmentry.IfÖrmentryisindeedveryresponsivetopastexit,evenintheabsenceofspeciÖcsupportorduringdeeprecessions,thentheÖrstoptionconsistinginrelativelylightstim-uluspolicies,wouldseemappropriate.Ifhowever,entryneedsspeciÖcconditionsorsupporttothrive,thenthesecondoptionseemsmoresuitable.Toshedlightonthesequestions,IconductanempiricalinvestigationofthedynamicsofÖrmentryatthesectorlevelfocusingonthemaineconomiesoftheEuroArea.SpeciÖcallyIasktwosetofquestions.First,howdoesachangeinÖrmentryorexita§ectsubsequentÖrmentry?Andhowtightanddurablearetheserelationships,ifany?Second,aretherefactorsthatcana§ecttheserelationships?Arethereconditionsorpolicies,underwhichmoreentryorexitatapointintimeleadtostrongerentrydowntheroad?Toaddressthesequestions,IfocusonakeydeterminantofÖrmentry.Namely,ÖrmsídecisiontoenterlargelydependsonexpectationsoffutureproÖts,whichinturntightlydependonexpectationsoffutureeconomicactivity.Inthisregard,potentialnewentrantsarelikelytotakepastentryandexitrealisationsas(imperfect)signalsaboutfutureprospects,andsettheirentry/exitdecisionsaccordingly.Forinstance,alargewaveofentrymaysignalstrongprospects,leadingpotentialnewentrantstoaccelerateentrysubsequently.Conversely,alargewaveofexitsmaybeinterpretedasasignalfordepressedprospects,therebydeterringpotentialnewentrantsfurtherdowntheroad.Inadditiontopastentryandexitdevelopments,Örmsconsideringentrymayalsotakeintoaccountthegeneraleconomicoutlook.Wheneconomicactivityisexpectedtoexpandstrongly,potentialnewentrantsarelikelytodiscardstrongexitsasasignalforweakprospectsandrushtopickuptheslackleftbyexiting4ItisimportanttonoteherethatthefewavailablestudiesinthespeciÖccontextoftheCovid-19recession,rathersuggestthatblanketsupport,whicharguablyreducedreallocation,stillbeneÖtedhigherproductivityÖrms(seeAndrewsetal.2021andCrosetal.2021)4Örms.Similarlyweakentryislesslikelytocarryoverwhentheoutlooklooksbright.Bycontrast,wheneconomicactivityisexpectedtostaydepressed,fewerÖrmsmaybewillingtoreplaceexitingones,asrunningabusinessinsuchanenvironmentwouldbesigniÖcantlymorechallenging.Inthesamevein,lowentryandweakgrowthexpectations,arelikely,takentogether,tobeinterpretedasevidenceofbadprospects,therebynegativelya§ectingsubsequentÖrmentry.ConsideringtheexperienceofthemainEuroAreacountriesovertheperiodrunningfrom2009to2019,myempiricalanalysisconÖrmstheseintuitions.SpeciÖcally,IobtainthreemainÖndings.First,entryisonlyweaklyrelatedtopastexits,especiallyintheshort-run,whileitexhibitssigniÖcanttimepersistence,ashigherentryinthepastisfollowedbyhigherentrysubsequently.AdecreaseingrossentrycoupledwithanincreaseingrossexitisthereforetypicallyfollowedbyastatisticallysigniÖcantlowernumberofnewentrantsoneyearlater,bothingrossandnetterms(i.e.entrynetofexits).However,thise§ecttendstobesmallinmagnitudeóabout10%oftheinitialdropóandrelativelyshort-livedóitdoesnotextendbeyondaone-yearhorizon.Mysecondresultisthatgrowthexpectationsmatterforthedynamicsofentry.MoreÖrmstendtoenter,bothingrossandnetterms,inresponsetomoreexits,butonlywhenforecastsforGDPgrowtharestrong.Similarly,adropincurrententryweighsonsubsequententrybutlesssowhenGDPisexpectedtogrowstrongly.Inaddition,IÖndtheimpactofgrowthexpectationsonthedynamicsofentrytoberobusttotheinclusionofanumberofcontrols.Forexample,IdonotÖndevidenceofasimilare§ectforcurrentGDPgrowth.Empirically,currentGDPgrowthmakeslittledi§erencetotheforwardpathofentry,onceGDPgrowthforecastshavebeentakenintoaccount.Inaddition,Iinvestigatestructuralfactorsthatlikelya§ectthedynamicsofentry,e.g.regulationsthatcapturebarrierstoentry,orthosea§ectingthequalityofinsolvencyproceedingsorthoseináuencingÖrmsíabilitytoobtaincredit.Here,IÖndevidencethatsuchregulationsalla§ectótovaryingdegreesóthedynamicsofentry.Theirimpactremainshowevermarginal,relativetothatofGDPgrowthexpectations.Thirdandlast,IdecomposeGDPgrowthexpectationsandshowthatexpectationsofprivateandpublicinvestmentseemtomattermostforthedynamicsofentry.51.1LiteraturereviewThisarticlebuildsonalargebodyofliteratureinvestigatingthedynamicsofentryandthepossibleimpactofaggregateconditionsonthesedynamics.AÖrststrandofliteraturehaslookedintothetwo-wayinteractionbetweenentryandexitontheonehandandthebusinesscycleontheotherhand.Intheirseminalpaper,CabelleroandHammour(1994)arguethatÖrmexitplaysakeyroleinimprovingoverallproductivity,asitallowsresourcestobereallocatedmoreeasily,fromexitingÖrmstoenteringandsurvivingonesthat,intheory,aremoreproductive.Inthisrespect,recessionsplayakeyrole,asperiodsofdisproportionateexits.PeíerandVertinsky(2008)empiricallyconÖrmtheseintuitions,showingthatexitsofoldÖrmstendtoliftentry,newentrantsbeingusuallymoreproductive.Lookingatdi§erentbusinesscyclephases,Asturiasetal.(2022)arguethataggregateproductivitygrowthdependsmoreonÖrmentryandexitduringhighgrowthperiods,whileentryandexithavebeenshowntoaccountforasizeablepartóalmost20%óoftheoutputresponsetoproductivityshocks.(ClementiandPalazzo2016).ConsistentwiththeseÖndings,Gourioetal.(2016)showthatafallinthenumberofnew-bornÖrmshaslong-lastingdetrimentale§ectsonoutputandproductivity.Thatsaid,theliteraturehasalsostressedthatmanyfactors,notleastthepresenceofÖnancialfrictionsandÖnancialshocks,mayhamperthecleansinge§ectthatcomeswithÖrmexit(seeBarlevy2003,Aghionetal.2007orOsotimehinandPappad‡2015).Turningtobusinesscycleproperties,entryandexithavebeenshowntoberespectivelypro-andcounter-cyclical(seeCook(2001)orCrane(2020)forinstance),apropertywealsouncoverinourdata(seebelow).Lookingatlead-lagcorrelations,Tian(2018)Öndsthatentryindicatorstendtoleadthebusinesscyclewhileexitindicatorstendtolagit.Closertothisstudy,competitionandmarketsizeconsiderationshavebeenshowntomatterforentry,throughtheirimpactonproÖtsofnewentrants(CampbellandHopenhayn2005).Similarly,Sedl·ekandSterk(2017)andMoreira(2017)arguethatrecessionsarenotsimplytimesoflowentrybutalsothatnewÖrmstendtobesmaller.Conversely,Cavallariaetal.(2021)show,usingemployer-employeematcheddataforItaly,thatrecessionsinducefewerbutbetterbusinessestoenterthemarket,theauthorsrelatingthelatterÖndingtothepresenceofrigiditiesonthelabourandthegoodsmarketsinItaly.Closesttothisstudy,Bilbiieetal(2012)isoneofthefewpapersthatgivesacentralroletoexpectations6offutureproÖtsindrivingÖrmentry.Yet,nonedrawsanexplicitlinkbetweenthedynamicsofentryandexpectationsoffutureeconomicactivity.Therestofthearticlegoesasfollows.Thenextsectionprovidesanoverviewofthedatausedinthispaper.Section3presentstheempiricalstrategyaswellastheÖrstevidenceonthedynamicsofentry.Section4introducesgrowthexpectationsandlooksathowtheyshapethedynamicsofentry,inadditiontorunninganumberofrobustnesschecksandextensions.ConclusionsareÖnallydrawninsection5.2Entry,exitandbusinessturnover:anoverview2.1DatasourcesToinvestigatetherelationshipbetweenentry,exitandtheeconomicoutlook,Idrawonseveraldatasets.First,theEurostatdatabaseonBusinessdemographyindicatorsprovidessectoraldataonÖrmentry,exitandtheoverallnumberofactiveÖrmsatthesectorallevelforanumberofEuropeancountries,startingfromthemid-2000ís.ItalsoprovidesinformationonemploymentcreationanddestructionbyenteringandexitingeconomiesoftheEuroArea,namely,Austria,Belgium,Germany,Spain,France,ItalyandtheNetherlands,whichtakentogetheraccountformorethan80%ofEuroAreaGDP.Forthesakeofbalancedness,theanalysisstartsin2009andendsin2019,evenifdataforBelgiumandGermanyonlystartshalf-waythrough(in2013).Thedatasetcoversallsectorsoftheeconomy.IhoweverexcludeìAgricultureîandìFinancialandInsuranceAc-tivitiesîandfocusonallavailable2-digitsectorsinìMiningandQuarryingî,ìManufacturingî,ìElectricity,Gas,Steamandairconditioningsupplyî,îWatersupply;Sewerage,Wastemanagementandremediationactivitiesî,ìConstructionî,ìWholesaleandretailtrade;Repairofmotorvehiclesandmotorcyclesî,ìTrans-portationandstorageî,ìAccommodationandfoodactivitiesî,ìInformationandcommunicationî,ìRealestateactivitiesî,ìProfessional,ScientiÖcandTechnicalactivitiesî,ìAdministrativeandsupportserviceactivitiesî,ìEducationî,ìHumanhealthandsocialworkactivitiesî,ìArts,Entertainmentandrecreationî5Forthesakeofbrevity,IfocusthepresentationoftheempiricalresultsonthedynamicsofÖrmentry.ResultspertainingtothedynamicsofÖrmemploymentcreationsbynewentrants,arequalitativelysimilar,andavailableuponrequest.7andìOtherserviceactivitiesîSecond,IcollectvintagesoftheOECDeconomicOutlookandIMFWorldEconomicOutlookdatabases,withaviewtomeasuregrowthforecastsfordi§erentmacroeconomicvariables(GDP,privateandpublicconsumption,privateandpublicinvestment,andnetexports).Ialsousethesedatabasestobuildreal-timeestimatesofcurrentgrowth(seebelowformoredetails).Third,theOECDStructuralPolicyIndicatorsDatabaseforEconomicResearch(SPIDER)databaseprovidescountry-leveldataforregulatoryindicators,focusingonthreesetofregulations:(i)thosea§ectingthequalityofinsol-vencyproceedings,(ii)thosea§ectingÖrmsíabilitytoobtaincredit,and(iii)thosegoverningÖrmentry.Last,IdrawontheEuroAreaBankLendingSurvey(BLS)andtheBISMacroeconomicdatasetfordataonlendingstandards,fundingcostsandcredittothecorporatesector.2.2Abirdís-eyeviewofentryandexitIstarttheanalysisbycomputingforeachcountry,simplestatisticsforgrossentryandexitrates.IdeÖnethegrossentryrateeist(thegrossexitratexist)incountriyiinsectorsinyeartastheratioofthenumberofÖrmsenteringEist(thenumberofÖrmsexitingXist)tothetotalnumberofactiveÖrmsNistincountryiinsectorsint:eist=andxist=(1)SummarystatisticsinTable1showthatonaverage,thegrossentryrateexceedsinmostcountriesthegrossexitrate,suggestingthatÖrmentryhasbeenonnet,positiveovertheperiodconsidered(2009-2019).Consistentwiththisobservation,mediangrossentryrates(aggregatedbycountry)alsoexceedcorrespondingmediangrossexitratesinallcountries,butSpain,whereexitsslightlyexceedentries.Table1alsoshowsthatgrossentryratesdisplayalargerdispersionthangrossexitratesinallcountries,asisvisiblefromtherespectivestandarddeviations.Interestingly,thislargerdispersionofentryratestypicallycomesfromtheupperpartofthedistribution(3rdquartile),whichismoreskewedtowardshighvaluesinthecaseofentrythaninthecaseofexit.[insertTable1here]8Turningnowtothecyclicalpropertiesofentryandexit,asimpleaverageofexitandentryratesbycountryandyearshowsthatexitiscountercyclicalwhileentryismildlypro-cyclical.ManyÖrmsexitwhenGDPgrowthislowwhilefewÖrmsexitwhenGDPgrowthishigh(Graph1,left-handpanel).[insertGraph1here]Conversely,thecorrelationofentrywithGDPgrowthisonlyweaklypositive(right-handpanel).6High-growthperiodsthereforedisplaymoreÖrmentrythanlow-growthperiods,butthedi§erenceinthissample,isbarelysigniÖcant.Consistentwithpreviousresults,asimpleanalysisoflead-lagcorrelationsbetweenentryandexitshowsthatmoreexitstendtobefollowedbysigniÖcantlylessentryandmoreexitsatthecountry-level(Graph2).Onthecontrary,thedataprovidesnoevidenceofasigniÖcantcorrelationbetweenentryandsubsequententryorexitatthecountry-level.[insertGraph2here]3Thedynamicsofentryatthesector-level3.1TheempiricalstrategyAbsentaclearpatternforaggregateentryoverthebusinesscycleorinrelationtosubsequententryandexit,disaggregatedsector-levelinformationcanprovideusefulinsightsintothedynamicsofentry,thankstosectoralvariationsinentryacrosscountriesandtime.Ithereforeestimateasetofregressionswherethedependentvariableisthecumulativegrossentryrateincountryiinsectors,hyearsahead,denotedasc+h,anddeÖnedasthecumulativesumofgrossentriestakenasaratioofthecurrentnumberofactiveÖrms.Similarly,IdeÖnethecumulativenetentryrateincountryiinsectors,hyearsahead,denotedas6Interestingly,theCovid-19recessionalsosuggestsonlyaweaklinkbetweenentryandGDPgrowth.Basedonbusinessregistrationandbankruptcydata,itappearsthatcountrieslikeSpainandItalyexperienceddeepfallsinnewbusinessregistra-tionsin2020astheysu§eredmajoroutputcontraction.Conversely,countrieslikeBelgiumandFrancealsosu§eredsigniÖcantoutputlossesbutnewbusinessregistrationsonlyfacedminorfalls,ifnotoutrightincreasesaswasthecaseinFrance.FinallyinGermany,outputlosseswereverymuchcontainedbutnewbusinessregistrationsfelldramatically.9c+h,anddeÖnedasthecumulativesumofgrossentriesnetofexits,takenasaratioofthecurrentnumberofactiveÖrms:c+h=andc+h=forh=1;2:::(2)Asexplanatoryvariables,Iincludethecurrentgrossentryandexitratesincountryiinsectors,inyeart,eistandxist.Inaddition,IsaturatethespeciÖcationwithÖxede§ects.DenotingAitthecountry-yeardummies;μisthecountry-sectordummies,ustthesector-yeardummies,and"theresiduals,thebaselinespeciÖcationestimatingthecumulativegrossentryratewritesas:7ln╱←=8h)ln╱←+8h)ln╱←+A+μ+u+"(3)Becauseentryandexitratesareboundedbetween0and1,IapplylogistictransformationstoallvariablesinspeciÖcations(3)sothatvariablesincludedintheregressionareunbounded,makinglinearinferencelicit.Moreover,deÖningthedependentvariablesasaratioofthecurrentnumberofactiveÖrmsensuresthattheysharethesamedenominatorwiththeindependentvariables,therebyavoidingrisksofspuriouscorrelations.8Complementingtheanalysisofgrossentry,IalsoestimateasimilartypeofspeciÖcationfornetentryasfollows:ln╱←=8h)ln╱←+8h)ln╱←+A+μ+u+"(4)Here,asimilartypeof(logistic)transformationisapplied,consideringinthisspeciÖccase,thatnetentryrangesbetween_1to+1.TherationaleforspeciÖcations(3)and(4)isasfollows.NewÖrmsbasetheirdecisionstoenteressen-tiallyonprospectsforfutureproÖtability.Inastylisedframeworkandbesidesconsiderationsrelatingto7Thecountry-timedummiesinparticularpurgedependentandindependentvariablesfromtheimpactofmacroeconomicvariables.Thecyclicalpropertiesofentryandexitthereforeplaynoroleinthisempiricalstudy.8Spuriouscorrelationscanariseifcumulativeentryrateissimplycomputedasthecumulativesumofentryrates.Inthiscase,alargenumberofexits,forinstance,reducesthesubsequentnumberofactiveÖrms,whichwouldartiÖpetition,suchprospectsdependonthesizeofthemarketandhowfastitisexpectedtogrowinthenearfuture.Whileassessingsuchforwardpathislikelytobedi¢cult,particularlyforpotentialnewentrants,actualentryandexitmovementscanprovidevaluableinformationthroughtheso-calleddemonstratione§ect(JohnsonandParker1994).Accordingtothisview,alargenumberofexitswouldbeinterpretedbypotentialnewentrantsasasignalfordepressedprospectsandtherebydiscourageentrydowntheroad.Conversely,alargernumberofÖrmentrycouldbeconsideredasavoteofconÖdenceinfutureprospects,therebyleadingadditionalÖrmstoentersubsequently.Followingthislogic,entryshouldthereforedependpositivelyonpastentryandnegativelyonpastexits.9TheparametersofinterestinspeciÖcations(3)and(4)are8h)and8Theycapturethechangeincumulative(grossornet)entryatdi§erenthorizonsfollowingaincreaseinpastentryandexit.BecausespeciÖcations(3)and(4)usenon-lineartransformationsofentryandexitrates,Ievaluatethechangein(grossornet)entryatdi§erenthorizonsfollowingagivenincrease/decreaseinentryorexitatthemedian.Denotingmeandmxtherespectivesamplemediansforgrossentryandexitrates,andmandm,thevegrossandnetentryrateshyearsaheadthesechangesrespectivelywriteas:=8h)and=forz={e;x}(5)3.2Theempiricalresults3.2.1ThebaselineregressionsTable2providestheempiricalresultsforestimatingthebaselinespeciÖcations(3)and(4).10Twomaintakeawaysemergefromtheseregressions.First,grossÖrmentrydisplayssigniÖcanttimepersistence(Örstrow):HigherentryisassociatedwithsigniÖcantlyhighersubsequentcumulativeentryupto2yearsahead.Similarly,whenentrydropsósayduringarecessionó,thenitremainssubsequentlydepressed,evenas9Itisstillworthnotingthattheserelationshipscouldbereversedbecauseofthecompetitione§ect:WithmoreÖrmsexiting,competitionforinputsaswellascompetitiononthemarketforÖnaloutputbothfall,leadingtohigherproÖtsforpotentialnewentrants.Inaddition,basedonsimilarconsiderations,thecompetitione§ectwouldimplyanegativerelationshipbetweencurrentandpastentryDunneetal.(1988)ÖndsevidenceofsuchnegativecorrelationforUSmanufacturingindustries.10Allempiricalresultsarebasedonregressionswherestandarderrorsareclusteredatthecountry-sectorlevel.theeconomymayalreadyberecovering.NetentryshowsasimilarpatternalthoughthemagnitudeandsigniÖcanceofestimatedcoe¢cientsdropsmorequickly,suggestingthatshocksa§ectingnetentryhavelesspersistente§ectsthanthosea§ectinggrossentry.Thesecondtake-awayisthatexitsdonotseemtoa§ecttheforwardpathofgrossentry.Ifestimatedcoe¢cientsturnfromnegativetopositivestartingfromthesecondyearonward,noneisstatisticallysigniÖcant.Currentexitsdohoweverseemtocorrelatepositivelywithsubsequentnetentry,likelyreáectingthesubsequentimpactongrossexits.[insertTable2here]Togetasenseofthemagnitudesimpliedfromtheseestimates,Iconsidertheimplicationsofaonepercentagedropinthegrossentryratecoupledwithaonepercentageincreaseinthegrossexitrate,onsubsequentcumulativegrossandnetentryrates.Usingexpressionsformarginalimpactsin(5),Graph3showsthatbothgrossandnetentryfallsigniÖcantlyafteroneyearinresponsetoadropinentryandincreaseinexit.Thefallishoweversmall,andamountsinbothcases,toabout0.2percentagepoint,whichrepresentsroughly10%oftheinitialcombinedimpulseinentryandexit.[insertGraph3here]Inaddition,theimpactongrossentryfadesawayafteroneyearandisstatisticallyinsigniÖcantfromtwoyearsaheadonwards.NetentryshowsasimilarpatternalthoughthecumulativeresponsebecomespositiveandsigniÖcant,butonlyafterfouryears.3.2.2Thedynamicsofentryacrosssectors,countriesandtime.Industryvs.servicesectorsPreviousestimatesforthedynamicsofentryarelikelytohidesigniÖcantdi§erencesacrosssectors,countriesandtime.Ibelowexploreeachofthemseparately,startingwithpossibledi§erencesbetweenindustryandservicesectors.ForthisIre-estimatespeciÖcations(3)and(4),allowingthecoe¢cientsofinterestó8h)and8h)thatlinkentryandexittosubsequentcumulativeentryótodi§erbetweenindustryandservicesectors.Labellingsectorsinmining,manufacturing,utilitiesandconstructionasindustrysectorsandtheotheronesasservicesectors,Table3showstwomaindi§erences.[insertTable3here]Ontheonehand,timepersistenceingrossentryisstrongerforservicethanforindustrysectors.Entryinservicesthereforecomesinwavesthatextendovermanyyears.Conversely,changesinentryinindustrysectorscarryoveronlyforashortperiodandtoamuchlesserextentthan