Big fish in a small pond: Locally dominant firms and the business cycle

Sima Jannati, George Korniotis and Alok Kumar

Journal of Economic Behavior & Organization, 2020, vol. 180, issue C, 219-240

Abstract: Following Gabaix (2011), we identify locally dominant firms that have a strong impact on their local macroeconomic environment, but are not among the largest 100 U.S. firms. Idiosyncratic shocks to these locally dominant firms propagate nationally and explain a significant portion of aggregate U.S. macroeconomic fluctuations. Specifically, we find that locally dominant firms exist in 13 U.S. states and productivity shocks to these firms explain almost 50% of the U.S. GDP growth.

Keywords: Idiosyncratic shocks; State-level business cycle; U.S. business cycle; Economic contagion (search for similar items in EconPapers)
JEL-codes: B22 E30 E32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:180:y:2020:i:c:p:219-240

DOI: 10.1016/j.jebo.2020.10.004

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