Firms' Internal Networks and Local Economic Shocks

Xavier Giroud and Holger M. Mueller

American Economic Review, 2019, vol. 109, issue 10, 3617-49

Abstract: Using confidential establishment-level data from the US Census Bureau's Longitudinal Business Database, this paper documents how local shocks propagate across US regions through firms' internal networks of establishments. Consistent with a model of optimal within-firm resource allocation, we find that establishment-level employment is sensitive to shocks in distant regions in which the establishment's parent firm is operating, and that the elasticity with respect to such shocks increases with the firm's financial constraint. At the aggregate regional level, we find that aggregate county-level employment is sensitive to shocks in distant counties linked through firms' internal networks.

JEL-codes: D22 G32 L14 L22 R23 R32 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aer.20170346
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Citations: View citations in EconPapers (9)

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