Life-Cycle Dynamics in Industrial Sectors. The Role of Banking Market Structure

This paper analyzes the role of bank competition on the life-cycle dynamics of non-financial industries. Using multi-dimensional data sets, which contain information on job creation and destruction for establishments in U.S. manufacturing sectors operating in different geographical regions and over time, I find evidence that bank competition accelerates the expansion of start-ups and helps them to thrive while young. Once these establishments are mature, however, less competitive banking markets are more propitious. Specifically, mature establishments expand at higher rates and exit the industry at a slower pace in less competitive banking markets. * I thank Jeff Campbell, Raghu Rajan and seminar participants at the Federal Reserve Bank of Chicago and at the Federal Reserve Bank of St. Louis 27 Annual Economic Policy Conference for very useful comments. The views expressed herein are those of the author and not necessarily those of the Federal Reserve Bank of Chicago or the Federal Reserve System.