Changing Business Dynamism and Productivity: Shocks vs. Responsiveness

By Ryan A. Decker, John C. Haltiwanger, Ron S. Jarmin, Javier Miranda. 2018

171 citations recorded by the source corpus.

The pace of job reallocation has declined in all U.S. sectors since 2000. In standard models, aggregate job reallocation depends on (a) the dispersion of idiosyncratic productivity shocks faced by businesses and (b) the marginal responsiveness of businesses to those shocks. Using several novel empirical facts from business microdata, we infer that the pervasive post-2000 decline in reallocation reflects weaker responsiveness in a manner consistent with rising adjustment frictions and not lower dispersion of shocks. The within-industry dispersion of TFP and output per worker has risen, while the marginal responsiveness of employment growth to business-level productivity has weakened. The responsiveness in the post-2000 period for young firms in the high-tech sector is only about half (in manufacturing) to two thirds (economy wide) of the peak in the 1990s. Counterfactuals show that weakening productivity responsiveness since 2000 accounts for a significant drag on a ggregate productivity.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/206e72d64ae4d832c09ed294ee52bd94b8644956

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In Economics and Econometrics

Citations in the corpus

New Perspectives on the Decline of US Manufacturing Employment (2018, background): “One potential explanation for this decline is a reduction in rms' responsiveness to productivity shocks due to rising adjustment frictions (Decker et al. (2018)), such as regulatory constraints, or the use of o shore rather than domestic capacity to make adjustments.”
Misallocation or Mismeasurement? (2020, methodology): “We will show that, using such data, one can project the elasticity of revenue with respect to inputs on TFPR to answer the question: to what extent 12The variance of labor productivity in Decker et al. (2018) increases by roughly 20-30% between 1996 and 2012.”
COVID-19 Is Also a Reallocation Shock (2020, background): “Decker et al. (2018) present evidence that plant-level employment growth became less responsive to plant-level total factor productivity (TFP) shocks after the 1980s in the U.S. manufacturing sector.”
Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe (2017, unknown): “2016) and declining business dynamism (Decker et al. 2016), identifying and correcting the distortions which disrupt the natural market selection mechanism is vital to reviving productivity growth.”
Increasing differences between firms: market power and the macro-economy (2018, background): “Decker et al. (2018) see this as one of many indicators suggesting a fall in U.S. business dynamism (particularly since 2000).”
What Happened to US Business Dynamism? (2019, unknown): “Finally, we target the employment share of young firms in the economy, available from Decker et al. (2016b) starting from 1981.”
Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory (2019, unknown): “A widely debated symptom of declining business dynamism in the United States is the fall in firm entry [see Decker et al. (2016), Karahan et al. (2016), Gourio et al.”
The Fall of the Labor Share and the Rise of Superstar Firms* (2017, methodology): “We followed Decker et al. (2018) by using the definition of high tech in”