Micro Propagation and Macro Aggregation

David Baqaee () and Elisa Rubbo
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David Baqaee: Department of Economics, University of California, Los Angeles, California, USA
Elisa Rubbo: Booth School of Business, University of Chicago, Chicago, Illinois, USA

Annual Review of Economics, 2023, vol. 15, issue 1, 91-123

Abstract: This article reviews a framework for studying the aggregation and propagation of microeconomic shocks in general equilibrium. We discuss the determinants of aggregate measures of real economic activity, like real GDP, real domestic absorption, and aggregate productivity in both efficient and inefficient environments. We also discuss how shocks from one set of producers are transmitted to other producers through prices and quantities. The framework we provide is amenable to generalization and can be used to study any collection of producers ranging from one isolated producer to an industry consisting of heterogeneous producers to an entire economy. We conclude with a brief survey of some of the applied questions that can be addressed using the analytical tools presented in this review and avenues for future work.

Keywords: aggregation; aggregate productivity; misallocation; production networks; propagation; comovement (search for similar items in EconPapers)
JEL-codes: D5 D61 E10 E32 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:anr:reveco:v:15:y:2023:p:91-123

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DOI: 10.1146/annurev-economics-082322-012833

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