Changing Business Dynamism and Productivity: Shocks versus Responsiveness
Ryan A. Decker, John Haltiwanger, Ron S. Jarmin, Javier Miranda
American Economic Review · 2020 · Volume 110 · Issue 12
Abstract
The pace of job reallocation has declined in the United States in recent decades. We draw insight from canonical models of business dynamics in which reallocation can decline due to (i) lower dispersion of idiosyncratic shocks faced by businesses, or (ii) weaker marginal responsiveness of businesses to shocks. We show that shock dispersion has actually risen, while the responsiveness of business-level employment to productivity has weakened. Moreover, declining responsiveness can account for a significant fraction of the decline in the pace of job reallocation, and we find suggestive evidence this has been a drag on aggregate productivity.
Keywords
Production, Cost, Capital, Total Factor, and Multifactor Productivity, Capacity, Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital, Aggregate Labor Productivity, Business Fluctuations, Cycles, Labor Force and Employment, Size, and Structure, Labor Demand, Human Capital, Skills, Occupational Choice, Labor Productivity, Industry Studies: Manufacturing: General
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