The Macroeconomic Implications of Firm Selection
Dudley Cooke () and
Tatiana Damjanovic ()
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Dudley Cooke: University of Exeter
No 2018_01, Working Papers from Durham University Business School
This paper studies the macroeconomic implications of firm selection in a model with monopolistic competition and translog preferences. Firm selection magnifies the impact of aggregate technology shocks. Magnification is limited by diminishing returns to new varieties and misallocation. We provide analytical results linking selection, diminishing returns, and misallocation with measured total factor productivity (TFP) and the distribution of firm-level productivity. A calibrated version of our model suggests the contribution of firm selection to variations in TFP is over 20 percent.
Keywords: Firm Selection; Translog Preferences; Productivity Distribution (search for similar items in EconPapers)
JEL-codes: E32 L11 (search for similar items in EconPapers)
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Working Paper: The Macroeconomic Implications of Firm Selection (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:dur:durham:2018_01
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