Changing Business Dynamism and Productivity: Shocks vs. Responsiveness

Ryan Decker, John Haltiwanger, Ron Jarmin and Javier Miranda

No 2018-007, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: The pace of job reallocation has declined in all U.S. sectors since 2000. In standard models, aggregate job reallocation depends on (a) the dispersion of idiosyncratic productivity shocks faced by businesses and (b) the marginal responsiveness of businesses to those shocks. Using several novel empirical facts from business microdata, we infer that the pervasive post-2000 decline in reallocation reflects weaker responsiveness in a manner consistent with rising adjustment frictions and not lower dispersion of shocks. The within-industry dispersion of TFP and output per worker has risen, while the marginal responsiveness of employment growth to business-level productivity has weakened. The responsiveness in the post-2000 period for young firms in the high-tech sector is only about half (in manufacturing) to two thirds (economy wide) of the peak in the 1990s. Counterfactuals show that weakening productivity responsiveness since 2000 accounts for a significant drag on a ggregate productivity.

Keywords: Dynamism; Entrepreneurship; Job reallocation; Labor supply and demand; Productivity (search for similar items in EconPapers)
JEL-codes: D22 D24 E24 J23 L26 M13 O47 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2018-02-02
New Economics Papers: this item is included in nep-eff, nep-ent, nep-lma, nep-mac and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57)

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Related works:
Working Paper: Changing Business Dynamism and Productivity: Shocks vs. Responsiveness (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2018-07

DOI: 10.17016/FEDS.2018.007

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