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Organizational dynamics and aggregate fluctuations: The role of financial relationships

Keisuke Otsu and Masashi Saito

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 12, 3044-3058

Abstract: This paper constructs an estimated dynamic stochastic general equilibrium model to study the role of labor reallocation between production and organizational tasks within a firm in movements in measured TFP in Japan. Allocating more labor to organizational tasks strengthens the financial relationship with financial intermediaries and helps firms to mitigate a widening in credit spread during financial difficulties. However, doing so reduces the labor allocated to production tasks and hence the measured TFP. Our quantitative analysis indicates that labor reallocation contributes to the observed procyclicality in measured TFP. We also find that this mechanism amplifies and propagates the effects of exogenous shocks on aggregate activity.

Keywords: Labor reallocation; Financial relationship; Organizational capital; TFP; Aggregate fluctuations (search for similar items in EconPapers)
JEL-codes: E13 E32 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Organizational Dynamics and Aggregate Fluctuations: The Role of Financial Relationships (2011) Downloads
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DOI: 10.1016/j.jedc.2013.07.010

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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