Tian, Can (2011): Technology choice and endogenous productivity dispersion over the business cycles.
This is the latest version of this item.
Download (379kB) | Preview
Various empirical works have shown that dispersion of firm-level profitability is significantly countercyclical. I incorporate firms' technology adoption decision into firm dynamics model with business cycle features to explain these empirical findings both qualitatively and quantitatively. The option of endogenous exiting and credit constraint jointly play an important role in motivating firms' risk taking behavior. The model predicts that relatively small sized firms are more likely to take risk, and that the dispersion measured as the variance/standard deviation of firm-level profitability is larger in recessions, which are consistent to the data.
|Item Type:||MPRA Paper|
|Original Title:||Technology choice and endogenous productivity dispersion over the business cycles|
|Keywords:||Firm Dynamics; Business Cycles; Countercyclical Dispersion|
|Subjects:||L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
|Depositing User:||Can Tian|
|Date Deposited:||15. Jan 2012 04:23|
|Last Modified:||13. Feb 2013 06:23|
Arellano, C., Y. Bai, and P. Kehoe (2009): "Financial Markets and Fluctuations in Uncertainty," Working Paper, Federal Reserve Bank of Minneapolis.
Bachmann, R., and C. Bayer (2011): "Uncertain Business Cycles - Really?" NBER Working Paper No. 16862.
Bachmann, R., and S. Elstner and E. Sims (2011): "Uncertainty and Economic Activity: Evidence from Business Survey Data," Working Paper, University of Michigan.
Bachmann, R., and G. Moscarini (2011): "Business Cycles and Endogenous Uncertainty," Working Paper, University of Michigan.
Balasubramanian, N. and J. Sivadasan (2009): "Capital Resalability, Productivity Dispersion, and Market Structure," The Review of Economics and Statistics, August 2009, 91(3): 547--557.
Bloom, N. (2009): "The Impact of Uncertainty Shocks," Econometrica, 77(3), 623-685.
Bloom, N., M. Floetotto, and N. Jaimovich (2010): "Really Uncertain Business Cycles," Working Paper, Stanford University.
Chugh, S. (2010): "Firm Risk and Leverage-Based Business Cycles," Working Paper, Univeristy of Maryland.
Clementi, G.L., and D. Palazzo (2010): "Entry, Exit, Firm Dynamics, and Aggregate Fluctuations," Working Paper, New York University.
Cooper, R., and J. Haltiwanger (2006): "On the Nature of Capital Adjustment Costs," Review of Economic Studies, 73(3), 611-633.
Dhawan, R. (2001): "Firm size and productivity differential: theory and evidence from a panel of US firms," Journal of Economic Behavior & Organization, Vol. 44, Issue 3, 269-293.
Dunne, T., M. Roberts, and L. Samuelson (1988): "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," The RAND Journal of Economics, Vol. 19, No. 4 (Winter, 1988), 495-515.
Eisfeldt, A.L., and A.A. Rampini (2006): "Capital Reallocation and Riquidity," Journal of Monetary Economics, 53 (2006), 369-399.
Gertler, M., and S. Gilchrist (1994): "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 309-40.
Hamilton, B.H. (2000): "Does entrepreneurship pay? An empirical analysis of the returns to self-employment." Journal of Political Econnomy, 108(3), 604--631.
Higson, C., S. Holly and P. Kattuman (2002): "The Cross-sectional Dynamics of the US Business Cycle: 1950--1999," Journal of Economic Dynamics & Control, 26 (2002), 1539-1555.
Hopenhayn, H. (1992): "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, 60(5), 1127-1150.
Kehrig, M. (2011): "The Cyclicality of Productivity Dispersion," Working Paper, Northwestern University.
Moskiwitz, T.J., and A. Vissing-Jorgensen (2002): "The returns to entrepreneurial investment: a private equity premium puzzle?" American Economic Review 92(4), 745--778.
Ouyang, M. (2009): "The scarring effect of recessions," Journal of Monetary Economics, Vol. 56, Issue 2, March 2009, 184-199.
Quadrini, V. (2009): "Entrepreneurship in macroeconomics," Annals of Finance, Volume 5, Numbers 3-4, 295-311.
Vereshchagina, G., and H. Hopenhayn (2009): "Risk Taking by Entrepreneurs," American Economic Review, 99(5), 1808-1830.
Available Versions of this Item
Technology choice and endogenous productivity dispersion over the business cycles. (deposited 03. Nov 2011 01:03)
- Technology choice and endogenous productivity dispersion over the business cycles. (deposited 15. Jan 2012 04:23) [Currently Displayed]