Hostname: page-component-76d6cb85b7-pn7tm Total loading time: 0 Render date: 2026-07-20T07:55:18.542Z Has data issue: false hasContentIssue false
  • English
  • Français

The Impact of Business Cycle Conditions on Firm Dynamics and Composition

Published online by Cambridge University Press:  29 March 2023

Cihan Artunç Open the ORCID record for Cihan Artunç [Opens in a new window]
Cihan Artunç*
Affiliation:
Assistant Professor, Middlebury College – Economics, 303 College Street Middlebury, VT 05753. E-mail: cartunc@middlebury.edu.
Get access Rights & Permissions [Opens in a new window]

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.

Information

Type
Article
Information
The Journal of Economic History , Volume 83 , Issue 2 , June 2023 , pp. 398 - 430
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Economic History Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

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).

References

REFERENCES

Agarwal, Rajshree, and Gort, Michael. “Firm and Product Life Cycles and Firm Survival.” American Economic Review 92, no. 2 (2002): 184–90.CrossRefGoogle Scholar
Ağır, Seven, and Artunç, Cihan. “The Wealth Tax of 1942 and the Disappearance of Non-Muslim Enterprises in Turkey.” Journal of Economic History 79, no. 1 (2019): 201–43.CrossRefGoogle Scholar
Ağır, Seven, and Artunç, Cihan. “Set and Forget? The Evolution of Business Law in the Ottoman Empire and Turkey.” Business History Review 95, no. 4 (2021): 703–38.CrossRefGoogle Scholar
Artunç, Cihan. “Religious Minorities and Firm Ownership in Early Twentieth-Century Egypt.” Economic History Review 72, no. 3 (2019): 979–1007.CrossRefGoogle Scholar
Artunç, Cihan. “Replication Files for ‘The Impact of Business Cycle Conditions on Firm Dynamics and Composition.’” Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2023-02-16. https://doi.org/10.3886/E184982V1 CrossRefGoogle Scholar
Artunç, Cihan, and Guinnane, Timothy W.. “Partnership as Experimentation.” Journal of Law, Economics, and Organization 35, no. 3 (2019): 455–88.CrossRefGoogle Scholar
Bartelsman, Eric J., Haltiwanger, John, and Scarpetta, Stefano. “Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries.” IZA Discussion Paper No. 1374; Tinbergen Institute Discussion Papers No. TI 2004-114/3; World Bank Policy Research Paper No. 3464, 2004.Google Scholar
Bartelsman, Eric, Scarpetta, Stefano, and Schivardi, Fabiano. “Comparative Analysis of Firm Demographics and Survival: Evidence from Micro-Level Sources in OECD Countries.” Industrial and Corporate Change 14, no. 3 (2005): 365–91.CrossRefGoogle Scholar
Bellone, Flora, Musso, Patrick, Nesta, Lionel, and Quéré, Michel. “Market Selection along the Firm Life Cycle.” Industrial and Corporate Change 17, no. 4 (2008): 753–77.CrossRefGoogle Scholar
Benguria, Felipe, Saffie, Felipe, and Urzúa, Sergio. “The Transmission of Commodity Price Super-Cycles.” NBER Working Paper No. 24560, Cambridge, MA, January 2021.Google Scholar
Blattman, Christopher, Hwang, Jason, and Williamson, Jeffrey G.. “Winners and Losers in the Commodity Lottery: The Impact of Terms of Trade Growth and Volatility in the Periphery 1870–1939.” Journal of Development Economics 82, no. 1 (2007): 156–79.CrossRefGoogle Scholar
Brandis, Royall. “Cotton Competition. US and Egypt, 1929–1948.” Southern Economic Journal (1953): 339–52.CrossRefGoogle Scholar
Brown, Nathan J. “The Precarious Life and Slow Death of the Mixed Courts of Egypt.” International Journal of Middle East Studies 25, no. 1 (1993): 33–52.CrossRefGoogle Scholar
Caballero, Ricardo J., and Hammour, Mohamad L.. “The Cleansing Effect of Recessions.” American Economic Review (1994): 1350–68.Google Scholar
Cavallari, Lilia, Romano, Simone, and Naticchioni, Paolo. “The Original Sin: Firms’ Dynamics and the Life-Cycle Consequences of Economic Conditions at Birth.” European Economic Review 138 (2021): 1038–44.CrossRefGoogle Scholar
Caves, Richard E. “Industrial Organization and New Findings on the Turnover and Mobility of Firms.” Journal of Economic Literature 36, no. 4 (1998): 1947–82.Google Scholar
Clementi, Gian Luca, and Palazzo, Berardino. “Entry, Exit, Firm Dynamics, and Aggregate Fluctuations.” American Economic Journal: Macroeconomics 8, no. 3 (2016): 1–41.Google Scholar
Crouchley, Arthur E. The Economic Development of Modern Egypt. New York: Longmans, Green & Co., 1938.Google Scholar
Decker, Ryan A., McCollum, Meagan, and Gregory, B. Upton Jr. “Boom Town Business Dynamics.” Journal of Human Resources (2022): doi: 10.3368/jhr.0221-11501R1.CrossRefGoogle Scholar
Drechsel, Thomas, and Tenreyro, Silvana. “Commodity Booms and Busts in Emerging Economies.” Journal of International Economics 112 (2018): 200–18.CrossRefGoogle Scholar
Dunne, Timothy, Roberts, Mark J., and Samuelson, Larry. “Patterns of Firm Entry and Exit in US Manufacturing Industries.” RAND Journal of Economics (1988): 495–515.CrossRefGoogle Scholar
Egypt. Codes des tribunaux mixtes d’Egypte précédés du règlement d’organisation judiciare. Mourès, 1907.Google Scholar
Egypt, Industrial and Commercial Census, 1937 (Cairo, 1942).Google Scholar
Egypt. Statistique des sociétés anonymes par actions, travaillant principalement en Égypte, au 31 décembre 1911, 1913.Google Scholar
Fernández, Andrés, Schmitt-Grohé, Stephanie, and Uribe, Martín. “World Shocks, World Prices, and Business Cycles: An Empirical Investigation.” Journal of International Economics 108 (2017): S2–S14.CrossRefGoogle Scholar
Gourio, François, Messer, Todd, and Siemer, Michael. “Firm Entry and Macroeconomic Dynamics: A State-Level Analysis.” American Economic Review 106, no. 5 (2016): 214–18.CrossRefGoogle Scholar
Gregg, Amanda G. “Factory Productivity and the Concession System of Incorporation in Late Imperial Russia, 1894–1908.” American Economic Review 110, no. 2 (2020): 401–27.CrossRefGoogle Scholar
Gregg, Amanda, and Nafziger, Steven. “Births, Lives, and Deaths of Corporations in Late Imperial Russia.” Mimeo, 2020.CrossRefGoogle Scholar
Guinnane, Timothy W. “Creating a New Legal Form: The GmbH.” Business History Review 95, no. 1 (2021): 3–32.CrossRefGoogle Scholar
Guinnane, Timothy W., Ron Harris, Naomi R. Lamoreaux, and Jean-Laurent Rosenthal. “Putting the Corporation in Its Place.” Enterprise and Society 8, no. 3 (2007): 687–729.CrossRefGoogle Scholar
Guinnane, Timothy W., and Martínez-Rodríguez, Susana. “Choice of Enterprise Form: Spain, 1886–1936.” Journal of Law, Economics, and Organization 34, no. 1 (2018): 1–26.CrossRefGoogle Scholar
Guinnane, Timothy W., and Schneebacher, Jakob. “Enterprise Form: Theory and History.” Explorations in Economic History 76 (2020): 101331.CrossRefGoogle Scholar
Haltiwanger, John, Jarmin, Ron S., and Miranda, Javier. “Who Creates Jobs? Small versus Large versus Young.” Review of Economics and Statistics 95, no. 2 (2013): 347–61.CrossRefGoogle Scholar
Hamilton, James D. “Why You Should Never Use the Hodrick-Prescott Filter.” Review of Economics and Statistics 100, no. 5 (2018): 831–43.CrossRefGoogle Scholar
Hansen, Bent. “Interest Rates and Foreign Capital in Egypt under British Occupation.” Journal of Economic History 43, no. 4 (1983): 867–84.CrossRefGoogle Scholar
Hopenhayn, Hugo A. “Entry, Exit, and Firm Dynamics in Long Run Equilibrium.” Econometrica (1992): 1127–50.CrossRefGoogle Scholar
Issa, Hossam M. Capitalisme et sociétés anonymes en Egypte: essai sur le rapport entre structure sociale et droit, vol. 111. Paris: Librairie générale de droit et de jurisprudence, 1970.Google Scholar
Issawi, Charles. An Economic History of the Middle East and North Africa. New York: Columbia University Press, 1982.Google Scholar
Jensen, J. Bradford, Robert H. McGuckin, and Kevin J. Stiroh. “The Impact of Vintage and Survival on Productivity: Evidence from Cohorts of US Manufacturing Plants.” Review of Economics and Statistics 83, no. 2 (2001): 323–32.CrossRefGoogle Scholar
Jordà, Òscar. “Estimation and Inference of Impulse Responses by Local Projections.” American Economic Review 95, no. 1 (2005): 161–82.CrossRefGoogle Scholar
Jovanovic, Boyan. “Selection and the Evolution of Industry.” Econometrica (1982): 649–70.CrossRefGoogle Scholar
Karakoç, Ulaş, Pamuk, Şevket, and Panza, Laura. “Industrialization in Egypt and Turkey, 1870–2010.” In The Spread of Modern Industry to the Periphery since 1871, edited by Kevin Hjortshøj O’Rourke and Jeffrey Gale Williamson, 142–65. Oxford: Oxford University Press, 2017.CrossRefGoogle Scholar
Kerr, William R., and Nanda, Ramana. “Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship.” Journal of Financial Economics 94, no. 1 (2009): 124–49.CrossRefGoogle Scholar
Kose, M. Ayhan. “Explaining Business Cycles in Small Open Economies: ‘How Much Do World Prices Matter’?” Journal of International Economics 56, no. 2 (2002): 299–327.CrossRefGoogle Scholar
Lamoreaux, Naomi R., and Rosenthal, Jean-Laurent. “Legal Regime and Contractual Flexibility: A Comparison of Business’s Organizational Choices in France and the United States during the Era of Industrialization.” American Law and Economics Review 7, no. 1 (2005): 28–61.CrossRefGoogle Scholar
Lee, Yoonsoo, and Mukoyama, Toshihiko. “Entry and Exit of Manufacturing Plants over the Business Cycle.” European Economic Review 77 (2015): 20–27.CrossRefGoogle Scholar
Mendoza, Enrique G. “The Terms of Trade, the Real Exchange Rate, and Economic Fluctuations.” International Economic Review (1995): 101–37.Google Scholar
Mitchell, B. R. British Historical Statistics. Cambridge: Cambridge University Press, 1988.Google Scholar
Mitchener, Kris James, and Pina, Gonçalo. “Pegxit Pressure.” Journal of International Money and Finance 107 (2020): 1021–91.CrossRefGoogle Scholar
Mitchener, Kris James, and Pina, Gonçalo. “Causal Effects of Countercyclical Interest Rates: Evidence from the Classical Gold Standard.” NBER Working Paper No. 29970, Cambridge, MA, April 2022.Google Scholar
Moreira, Sara. “Firm Dynamics, Persistent Effects of Entry Conditions, and Business Cycles.” Mimeo, 2017.CrossRefGoogle Scholar
Nicholas, Tom. “The Organization of Enterprise in Japan.” Journal of Economic History 75, no. 2 (2015): 333–63.CrossRefGoogle Scholar
Norris, P. K. Cotton Production in Egypt. No. v. 451-475 in Cotton Production in Egypt. Washington, DC: U.S. Department of Agriculture, 1934.Google Scholar
Onji, Kazuki, and Tang, John P.. “Taxes and the Choice of Organizational Form in Late Nineteenth Century Japan.” Journal of Economic History 77, no. 2 (2017): 440–72.CrossRefGoogle Scholar
Panza, Laura. “De-Industrialization and Re-Industrialization in the Middle East: Reflections on the Cotton Industry in Egypt and in the Izmir Region.” Economic History Review 67, no. 1 (2014): 146–69.CrossRefGoogle Scholar
Panza, Laura, and Karakoç, Ula. “Overcoming the Egyptian Cotton Crisis in the Interwar Period: The Role of Irrigation, Drainage, New Seeds, and Access to Credit.” Economic History Review 74, no. 1 (2021): 60–86.CrossRefGoogle Scholar
Rampini, Adriano A. “Entrepreneurial Activity, Risk, and the Business Cycle.” Journal of Monetary Economics 51, no. 3 (2004): 555–73.CrossRefGoogle Scholar
Rand, John, and Tarp, Finn. “Business Cycles in Developing Countries: Are They Different?” World Development 30, no. 12 (2002): 2071–88.CrossRefGoogle Scholar
Ravn, Morten O., and Uhlig, Harald. “On Adjusting the Hodrick-Prescott Filter for the Frequency of Observations.” Review of Economics and Statistics 84, no. 2 (2002): 371–76.CrossRefGoogle Scholar
Sedláček, Petr. “Lost Generations of Firms and Aggregate Labor Market Dynamics.” Journal of Monetary Economics 111 (2020): 16–31.CrossRefGoogle Scholar
Sterk, Vincent, Sedláček, Petr, and Pugsley, Benjamin. “The Nature of Firm Growth.” American Economic Review 111, no. 2 (2021): 547–79.CrossRefGoogle Scholar
Tian, Can. “Firm-Level Entry and Exit Dynamics over the Business Cycles.” European Economic Review (2018): 298–326.CrossRefGoogle Scholar
Tignor, Robert L. State, Private Enterprise and Economic Change in Egypt, 1918–1952. Princeton, NJ: Princeton University Press, 1984.Google Scholar
Yousef, Tarik M. “The Political Economy of Interwar Egyptian Cotton Policy.” Explorations in Economic History 37, no. 4 (2000): 301–25.CrossRefGoogle Scholar
Yousef, Tarik M. “Egypt’s Growth Performance under Economic Liberalism: A Reassessment with New GDP Estimates, 1886–1945.” Review of Income and Wealth 48, no. 4 (2002): 561–79.CrossRefGoogle Scholar
Supplementary material: PDF

Artunç supplementary material

Online Appendix
Download Artunç supplementary material(PDF)
PDF 2 MB