Skewed Business Cycles

Sergio Salgado, Fatih Guvenen and Nicholas Bloom
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Sergio Salgado: University of Minnesota

No 1189, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: We show in panels of US Census and international firm data that the cross-sectional skewness of employment and sales growth distributions are procyclical. In particular, during recessions they display a large left-tail of negative growth rates (and during booms a large right tail of positive growth rates). These results are extremely robust to different selection criteria, across countries, industries, and measures. We build a heterogeneous-agents model in which entrepreneurs face shocks with time varying skewness risk that matches the firm-level distributions we document for the US. This model shows that a negative shock to skewness (that keeps the mean and variance constant) to firms’ productivity growth generates significant and persistent decreases in investment, hiring, growth and consumption. Hence, we argue that periods of heightened left-tail risk help to drive business cycle fluctuations.

Date: 2019
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
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Citations: View citations in EconPapers (34)

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Related works:
Working Paper: Skewed Business Cycles (2019)
Working Paper: Skewed Business Cycles (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:1189

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