Big Fish in a Small Pond: Locally-Dominant Firms and the Business Cycle

Journal of Economic Behavior & Organization, Volume 180, December 2020

82 Pages Posted: 14 Dec 2016 Last revised: 29 Oct 2020

See all articles by Sima Jannati

Sima Jannati

University of Texas at Arlington

George M. Korniotis

University of Miami - Department of Finance

Alok Kumar

University of Miami - Miami Herbert Business School

Date Written: November 12, 2019

Abstract

Following Gabaix (2011), we identify locally-dominant firms that have a strong impact on their local macroeconomic environment, but are not among the largest 100 U.S. firms. Idiosyncratic shocks to these locally-dominant firms also propagate nationally and explain a significant portion of aggregate U.S.\ macroeconomic fluctuations. Specifically, we find that locally-dominant firms exist in 13 U.S. states and productivity shocks to these firms explain almost 50% of the U.S. GDP growth.

Keywords: Idiosyncratic shocks; state-level business cycle; U.S. business cycle; economic contagion

JEL Classification: B22, E30, E32

Suggested Citation

Jannati, Sima and Korniotis, George M. and Kumar, Alok, Big Fish in a Small Pond: Locally-Dominant Firms and the Business Cycle (November 12, 2019). Journal of Economic Behavior & Organization, Volume 180, December 2020, Available at SSRN: https://ssrn.com/abstract=2884737 or http://dx.doi.org/10.2139/ssrn.2884737

Sima Jannati (Contact Author)

University of Texas at Arlington ( email )

701 S. West Street
Arlington, TX 76019
United States

George M. Korniotis

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States
305-284-5728 (Phone)

Alok Kumar

University of Miami - Miami Herbert Business School ( email )

517B Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://sites.google.com/view/alokmiami/home

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