Accounting for Productivity Dispersion over the Business Cycle

Robert Kurtzman and David Zeke

No 2016-045, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper presents accounting decompositions of changes in aggregate labor and capital productivity. Our simplest decomposition breaks changes in an aggregate productivity ratio into two components: A mean component, which captures common changes to firm factor productivity ratios, and a dispersion component, which captures changes in the variance and higher order moments of their distribution. In standard models with heterogeneous firms and frictions to firm input decisions, the dispersion component is a function of changes in the second and higher moments of the log of marginal revenue factor productivities and reflects changes in the extent of distortions to firm factor input allocations across firms. We apply our decomposition to public firm data from the United States and Japan. We find that the mean component is responsible for most of the variation in aggregate productivity over the business cycle, while the dispersion component plays a modest role.

Keywords: Accounting Decomposition; Business Cycles; Misallocation; Productivity (search for similar items in EconPapers)
JEL-codes: D24 E32 L11 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2016-05-20
New Economics Papers: this item is included in nep-bec, nep-eff and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Accounting for Productivity Dispersion over the Business Cycle (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2016-45

DOI: 10.17016/FEDS.2016.045

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