American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Changing Business Dynamism and Productivity: Shocks versus Responsiveness
American Economic Review
vol. 110,
no. 12, December 2020
(pp. 3952–90)
Abstract
The pace of job reallocation has declined in the United States in recent decades. We draw insight from canonical models of business dynamics in which reallocation can decline due to (i) lower dispersion of idiosyncratic shocks faced by businesses, or (ii) weaker marginal responsiveness of businesses to shocks. We show that shock dispersion has actually risen, while the responsiveness of business-level employment to productivity has weakened. Moreover, declining responsiveness can account for a significant fraction of the decline in the pace of job reallocation, and we find suggestive evidence this has been a drag on aggregate productivity.Citation
Decker, Ryan A., John Haltiwanger, Ron S. Jarmin, and Javier Miranda. 2020. "Changing Business Dynamism and Productivity: Shocks versus Responsiveness." American Economic Review, 110 (12): 3952–90. DOI: 10.1257/aer.20190680Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- J21 Labor Force and Employment, Size, and Structure
- J23 Labor Demand
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- L60 Industry Studies: Manufacturing: General