Asymmetric Firm Dynamics under Rational Inattention

Antonella Tutino and Anton Cheremukhin
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Antonella Tutino: Federal Reserve Bank of Dallas

No 161, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: We document new evidence on the link between business failures, markups and business cycle asymmetry in the U.S. economy. We study a model where costly information-processing constraints affect exit decisions of heterogeneous firms in the presence of an aggregate demand externality. We show that such a model is capable of explaining both the novel and the classical empirical evidence on output growth asymmetry, the asymmetry between entry and exit rates, as well as counter-cyclical variations in profit margins.

Date: 2012
New Economics Papers: this item is included in nep-bec and nep-dge
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Asymmetric firm dynamics under rational inattention (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed012:161

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