Establishment Exits in Germany: The Role of Size and Age

35 Pages Posted: 25 Feb 2012

See all articles by Daniel Fackler

Daniel Fackler

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Department of Economics

Claus Schnabel

University of Erlangen-Nuremberg; IZA Institute of Labor Economics

Joachim Wagner

University of Lueneburg - Institute of Economics; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics; IZA Institute of Labor Economics

Abstract

Using comprehensive data for West Germany, this paper investigates the determinants of establishment exit. We find that between 1975 and 2006 the average exit rate has risen considerably. In order to test various "liabilities" of establishment survival identified in the literature, we analyze the impact of establishment size and put a special focus on differences between young and mature establishments. Our empirical analysis shows that the mortality risk falls with establishment size, which confirms the liability of smallness. The probability of exit is substantially higher for young establishments which are not more than five years old, thus confirming the liability of newness. There also exists a liability of aging since exit rates first decline over time, reaching a minimum at ages 15 to 18, and then rise again somewhat. The determinants of exit differ substantially between young and mature establishments, suggesting that young establishments are more vulnerable in a number of ways.

Keywords: firm exits, Germany

JEL Classification: L2

Suggested Citation

Fackler, Daniel and Schnabel, Claus and Wagner, Joachim, Establishment Exits in Germany: The Role of Size and Age. IZA Discussion Paper No. 6349, Available at SSRN: https://ssrn.com/abstract=2010944

Daniel Fackler (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Department of Economics ( email )

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Claus Schnabel

University of Erlangen-Nuremberg ( email )

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Joachim Wagner

University of Lueneburg - Institute of Economics ( email )

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