This paper shows that employment of U.S. firm cohorts is strongly influenced by aggregate conditions at the time of their entry. Employment variations across cohorts are found to be persistent and largely driven by differences in average firm size, rather than the number of firms. To disentangle startup composition from post-entry choices, we estimate a general equilibrium firm dynamics model. We find that aggregate conditions at birth drive the vast majority of employment variation across cohorts through their effect on the proportion of startups with high growth potential. In the aggregate, startup conditions result in large slow-moving fluctuations in employment. Joint with Vincent Sterk.
Keywords: Firm Dynamics, Heterogeneous Agents, Maximum Likelihood, DSGE
JEL Codes: E32, D22, L11, M13
