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PreprintCited by 107Monetary Policy and Economic ImpactEconomic Growth and ProductivityEconomic Theory and Policy

“The Cyclicality of Productivity Dispersion”

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Kehrig, Matthias·2011·SSRN Electronic Journal
DOI 10.2139/ssrn.1787761
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Abstract

Using plant-level data, I show that the dispersion of total factor productivity in U.S. durable manufacturing is greater in recessions than in booms. This cyclical property of productivity dispersion is much less pronounced in non-durable manufacturing. In durables, this phenomenon primarily reflects a relatively higher share of unproductive firms in a recession. In order to interpret these findings, I construct a business cycle model where production in durables requires a fixed input. In a boom, when the market price of this fixed input is high, only more productive firms enter and only more productive incumbents survive, which results in a more compressed productivity distribution. The resulting higher average productivity in durables endogenously translates into a lower average relative price of durables. Additionally, my model is consistent with the following business cycle facts: procyclical entry, procyclical aggregate total factor productivity, more procyclicality in durable than non-durable output, procyclical employment and countercyclicality in the relative price of durables and the cross section of stock returns.

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  • The dispersion in TFPR is increasing, especially in the upper tail, where TFPR captures both markups and cost-side heterogeneity.

    “He studies the cyclicality of productivity and finds that the dispersion in TFPR is increasing, especially in the upper tail, where TFPR captures both markups and cost-side heterogeneity.”

    From The rise of market power and the macroeconomic implications (2020) · cites this paper as Kehrig (2011)

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Research works printed but not linked: 14

  1. Bartelsmann, E. J., R. J. Caballero, and R. K. Lyons (1994): "Customer-and Supplier- Driven Externalities," American Economic Review, 84, 1075-1084.
  2. Bartelsmann, E. J. and M. Doms (2000): "Understanding Productivity: Lessons from Longitudinal Data," Journal of Economic Literature, 38, 569-594.
  3. Cooper, R. and J. C. Haltiwanger (1990): "Inventories and the Propagation of Sectoral Shocks," American Economic Review, 80, 170-190.
  4. ---(1993): "The Aggregate Implications of Machine Replacement: Theory and Evidence," American Economic Review, 83, 181-186.
  5. Cooper, R., J. C. Haltiwanger, and L. Power (1999): "Machine Replacement and the Business Cycle: Lumps and Bumps," American Economic Review, 89, 921-946.
  6. Fox, J. T. and V. Smeets (forthcoming): "Does Input Quality Drive Measured Differences in Firm Productivity?" International Economic Review.
  7. Gomes, J., J. Greenwood, and S. Rebelo (2001): "Equilibrium Unemployment," Journal of Monetary Economics, 48, 109-152.
  8. Hall, R. E. (1990): "Invariance Properties of Solow's Residual," in Growth, Productivity, Employment: Essays to Celebrate Bob Solow's Birthday, ed. by P. A. Diamond, MIT Press, chap. 5, 71-111.
  9. ---(2000): "Reorganization," Carnegie-Rochester Conference Series on Public Policy, 52, 1-22.
  10. Khan, A. and J. K. Thomas (2003): "Nonconvex Factor Adjustments in Equilibrium Business Cycle Models: Do Nonlinearities Matter?" Journal of Monetary Economics, 50, 331-360.
  11. Schumpeter, J. A. (1939): Business Cycles, New York: McGraw-Hill.
  12. Song, Z., K. Storesletten, and F. Zilibotti (2011): "Growing Like China," American Economic Review, 101, 196-233.
  13. Thomas, J. K. (2002): "Is Lumpy Investment Relevant for the Business Cycle?" Journal of Political Economy, 110, 508-534.
  14. Wooldridge, J. M. (2009): "On Estimating Firm-level Production Functions Using Proxy Variables to Control for Unobservables," Economics Letters, 104, 112-114.

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Authors
Kehrig, M.
Affiliations
National Bureau of Economic Research (US)
Corresponding author
Kehrig, Matthias
Venue
SSRN Electronic Journal
Publisher
Elsevier BV
Published
2011
ISSN
1556-5068 (ISSN-L)
DOI
10.2139/ssrn.1787761
OpenAlex
W1489120832
Cited by
107
References
110
Citations by year
2026: 3 · 2024: 2 · 2023: 1 · 2022: 3 · 2021: 7 · 2020: 7 · 2019: 6 · 2018: 6 · 2017: 13 · 2016: 8 · 2015: 9 · 2014: 18 · 2013: 11 · 2012: 8
Type
posted content
Language
en
Open access
Locations
  • SSRN Electronic Journal (publishedVersion)
  • SSRN Electronic Journal (acceptedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • 2011 Meeting Papers (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Productivity
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Economic Theory and Policy
Keywords
productivity dispersion, business cycles, durable goods manufacturing, economic recession, fixed inputs, firm entry, business survival, business cycle model, total factor productivity

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