ON THE TURNOVER OF BUSINESS FIRMS AND BUSINESS MANAGERS

This paper develops a model of small business failure and sale that is motivated by recent evidence concerning how the failure and sale of s mall businesses vary with the age of the business and the tenure of th e manager. This evidence motivates two key features of the model: a ma tch between the manager and the business, and characteristics of busin esses that survive beyond the current match. The parameters of the mod el are estimated, and the properties of this parametric model are stud ied. This analysis results in a simple characterization of the working s of the small business sector.