Changing Business Dynamism and Productivity: Shocks versus Responsiveness

Ryan A. Decker, John Haltiwanger, Ron Jarmin and Javier Miranda

American Economic Review, 2020, vol. 110, issue 12, 3952-90

Abstract: The pace of job reallocation has declined in the United States in recent decades. We draw insight from canonical models of business dynamics in which reallocation can decline due to (i) lower dispersion of idiosyncratic shocks faced by businesses, or (ii) weaker marginal responsiveness of businesses to shocks. We show that shock dispersion has actually risen, while the responsiveness of business-level employment to productivity has weakened. Moreover, declining responsiveness can account for a significant fraction of the decline in the pace of job reallocation, and we find suggestive evidence this has been a drag on aggregate productivity.

JEL-codes: D24 E24 E32 J21 J23 J24 L60 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (95)

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DOI: 10.1257/aer.20190680

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