POST-ENTRY BEHAVIOR AND THE CYCLE - EVIDENCE FROM GERMANY

Based on a rich database on establishments in western Germany, the pap er aims at characterising the relationship between, on the one hand, g rowth and exit of entering cohorts and, on the other hand, aggregate b usiness fluctuations. A main finding is that exit is not responsive to the cycle, which is at odds with views of recessions as times of 'cle ansing' where creative destruction processes occur. The growth of surv ivors also displays little cyclical sensitivity, but tends to become m ore responsive to aggregate business fluctuations as the cohort ages. Two possible explanations for this role of age on the cyclical sensiti vity of surviving units are offered in the final section of the paper. The first draws on the product specialisation of young and more estab lished plants, the second on the role of irreversible investment and i ndustry selection.