REALLOCATION IN THE GREAT RECESSION: CLEANSING OR NOT?
Lucia Foster (),
Cheryl Grim and
Working Papers from U.S. Census Bureau, Center for Economic Studies
The high pace of output and input reallocation across producers is pervasive in the U.S. economy. Evidence shows this high pace of reallocation is closely linked to productivity. Resources are shifted away from low productivity producers towards high productivity producers. While these patterns hold on average, the extent to which the reallocation dynamics in recessions are “cleansing” is an open question. That is, are recessions periods of increased reallocation that move resources away from lower productivity activities towards higher productivity uses? It could be recessions are times when the opportunity cost of time and resources are low implying recessions will be times of accelerated productivity enhancing reallocation. Prior research suggests the recession in the early 1980s is consistent with an accelerated pace of productivity enhancing reallocation. Alternative hypotheses highlight the potential distortions to reallocation dynamics in recessions. Such distortions might arise from many factors including, for example, distortions to credit markets. We find that in post-1980 recessions prior to the Great Recession, downturns are periods of accelerated reallocation that is even more productivity enhancing than in normal times. In the Great Recession, we find the intensity of reallocation fell rather than rose (due to the especially sharp decline in job creation) and the reallocation that did occur was less productivity enhancing than in prior recessions.
New Economics Papers: this item is included in nep-eff, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (41) Track citations by RSS feed
Downloads: (external link)
https://www2.census.gov/ces/wp/2013/CES-WP-13-42.pdf First version, 2013 (application/pdf)
Journal Article: Reallocation in the Great Recession: Cleansing or Not? (2016)
Working Paper: Reallocation in the Great Recession: Cleansing or Not? (2014)
Chapter: Reallocation in the Great Recession: Cleansing or Not? (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:13-42
Access Statistics for this paper
More papers in Working Papers from U.S. Census Bureau, Center for Economic Studies Contact information at EDIRC.
Series data maintained by Erica Coates ().