Changing Business Dynamism and Productivity: Shocks versus Responsiveness

By Ryan A. Decker, John C. Haltiwanger, Ron S. Jarmin, Javier Miranda. 2020

154 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 aggregate productivity.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/9514f414f64453f920a747ba94d64055932499e3

Citations in the corpus

• Advanced Technologies Adoption and Use by U.S. Firms: Evidence from the Annual Business Survey (2020, unknown): “…point to increasing firm heterogeneity along a number of economically important dimensions (Andrews et al. 2015; Van Reenen 2018; Song et al. 2019; Decker et al. 2020; Autor et al. 2020; Bennett 2020a), some of which has been linked empirically to IT use (Barth et al. 2020; Lashkari et al. 2020).”