The Firm Dynamics of Business Cycles
We use firm dynamics statistics on employment by age, entry, exit, and job flows to identify sources of business cycle fluctuations in the U.S. economy since 1980. We extend the Hopenhayn (1992) firm dynamics model by incorporating capital and debt accumulation to the firm's problem and savings to the consumer's problem. Analyzing the implications of unexpected productivity, credit, labor wedge, and investment wedge shocks for firm dynamics statistics, we show that (a) productivity shock accounts for the 1990-91 and 2001 recessions, and (b) productivity and credit shocks jointly account for the 1980-82 and 2007-09 recessions.
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| Language: | English |
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Inter-American Development Bank
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| Subjects: | Productivity Shock, Production and Business Cycle, Macroeconomy, E24 - Employment • Unemployment • Wages • Intergenerational Income Distribution • Aggregate Human Capital • Aggregate Labor Productivity, E32 - Business Fluctuations • Cycles, D22 - Firm Behavior: Empirical Analysis, D21 - Firm Behavior: Theory, firm dynamics; business cycles, |
| Online Access: | http://dx.doi.org/10.18235/0001792 https://publications.iadb.org/en/firm-dynamics-business-cycles |
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