Firm-Age Distribution and the Inactive Rate of Firms

It is as important to consider how a firm will cease its activities as how it will continue those same activities. The short-term inactive rate of firms is observed in the long term as their age distribution. In this chapter, we identify the age dependence of the inactive rate of firms and link it to the long-term property of firm-age distribution. Specifically, we investigated the inactive rates of firm activities by comparing their 2014 and 2015 statuses in Germany, Spain, France, the United Kingdom, Italy, Japan, Korea, and the Netherlands. We found that in Japan, the inactive rate of firm activities does not depend on a firm’s age. In other countries, however, the inactive rate of young firms, which was higher than that of more established firms, gradually fell and eventually became constant as firms aged. This inactive rate leads to the following conclusion. In Japan, firm-age distribution decreases exponentially; in other countries, it exponentially decreases asymptotically, but young firms shift slightly upward. Using empirical data, we compared the inactive rate of firms with parameters measured from firm-age distribution and confirmed our analytical discussion.