Multi-product firms and business cycle dynamics

Antonio Minniti and Francesco Turino

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: Recent empirical evidence provided by Bernard et al. (2010) and Broda and Weinstein (2010) shows that a significant share of product creation and destruction in U.S. industries occurs within existing firms and accounts for a relevant share of aggregate output. In the present paper, and consistently with this evidence, we relax the standard assumption of mono-product firms that is typically made in dynamic general equilibrium models. Building on the work of Jaimovich and Floetotto (2008), we develop an RBC model with multi-product firms and endogenous markups to assess the implications of the intra-firm extensive margin on business cycle fluctuations. In this environment, the procyclicality of product creation emerges as a consequence of strategic interactions among firms. Because of the proliferation effect induced by changes in product scope, our model embodies a quantitatively important magnification mechanism of technology shocks.

Keywords: Multi-product Firms; Business Cycles; Firm Dynamics. (search for similar items in EconPapers)
JEL-codes: E32 L11 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2011-09
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge, nep-ent, nep-mac and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2011-20.pdf Fisrt version / Primera version, 2011 (application/pdf)

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Journal Article: Multi-product firms and business cycle dynamics (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2011-20

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