TFP during a credit crunch

Nicolas Petrosky-Nadeau

Journal of Economic Theory, 2013, vol. 148, issue 3, 1150-1178

Abstract: The financial crisis of 2008 was followed by sharp contractions in aggregate output and employment and an unusual increase in aggregate total factor productivity (TFP). This paper attempts to explain these facts by modeling the creation and destruction of jobs in the presence of heterogeneity in firm productivity and frictional credit and labor markets. The aggregate level of TFP is determined by both the underlying distribution of firm productivity and the structures of the credit and labor markets. Adverse shocks to credit markets destroy the least productive jobs and slow job creation, thus raising aggregate TFP and unemployment, and reducing output.

Keywords: Aggregation; Productivity; Search; Job creation and destruction; Financial frictions; Business cycles (search for similar items in EconPapers)
JEL-codes: E32 E44 J64 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:148:y:2013:i:3:p:1150-1178

DOI: 10.1016/j.jet.2012.09.019

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