Cross-Sectoral Variation in The Volatility of Plant-Level Idiosyncratic Shocks

Rui Castro, Gian Luca Clementi and Yoonsoo Lee ()

No 17659, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We estimate the volatility of plant-level idiosyncratic shocks in the U.S. manufacturing sector. Our measure of volatility is the variation in Revenue Total Factor Productivity which is not explained by either industry- or economy-wide factors, or by establishments' characteristics. Consistent with previous studies, we find that idiosyncratic shocks are much larger than aggregate random disturbances, accounting for about 80% of the overall uncertainty faced by plants. The extent of cross-sectoral variation in the volatility of shocks is remarkable. Plants in the most volatile sector are subject to about six times as much idiosyncratic uncertainty as plants in the least volatile. We provide evidence suggesting that idiosyncratic risk is higher in industries where the extent of creative destruction is likely to be greater.

JEL-codes: D24 L16 L60 O30 O31 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-bec and nep-dge
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Published as Cross Sectoral Variation in the Volatility of Plant Level Idiosyncratic Shocks† Rui Castro1, Gian Luca Clementi2,3 andYoonsoo Lee4 The Journal of Industrial Economics Volume 63, Issue 1, pages 1–29, March 2015

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Related works:
Journal Article: Cross Sectoral Variation in the Volatility of Plant Level Idiosyncratic Shocks (2015)
Working Paper: Cross-sectoral variation in the volatility of plant-level idiosyncratic shocks (2014)
Working Paper: Cross–Sectoral Variation in The Volatility of Plant–Level Idiosyncratic Shocks (2014)
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