Dispersion Over the Business Cycle: Passthrough, Productivity, and Demand

Mikael Carlsson, Alex Clymo and Knut-Eric Joslin
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Alex Clymo: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, University of Essex
Knut-Eric Joslin: Kristiania University College = Høyskolen Kristiania

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Abstract: We characterise the cyclical dispersion of firm-level (physical) productivity and demand shocks using Swedish microdata. Demand shock dispersion increases by more than productivity shock dispersion in recessions and explains most of the variation in sales growth dispersion. Productivity shocks pass through incompletely to prices and hence have a limited effect on sales dispersion. We directly estimate demand curves and reject the constant elasticity of substitution (CES) benchmark. We incorporate our non-CES demand curves into a heterogeneous-firm model, show it matches these micro facts, and study its implications for uncertainty shocks. Demand shock dispersion has unambiguously negative effects on output via a "wait and see channel", while productivity shock dispersion instead affects output negatively by inducing markup dispersion.

Date: 2026
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Published in The Economic Journal, inPress, ⟨10.1093/ej/ueag014⟩

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Related works:
Working Paper: Dispersion Over the Business Cycle: Passthrough, Productivity, and Demand (2026)
Working Paper: Dispersion over the business cycle: passthrough, productivity and demand? (2023)
Working Paper: DISPERSION OVER THE BUSINESS CYCLE:PASSTHROUGH,PRODUCTIVITY, AND DEMAND (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-05667129

DOI: 10.1093/ej/ueag014

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