Reallocation in the Great Recession: Cleansing or Not?

68 Pages Posted: 3 Sep 2014 Last revised: 23 Feb 2015

See all articles by Lucia Foster

Lucia Foster

U.S. Census Bureau - Center for Economic Studies

Cheryl Grim

U.S. Census Bureau - Center for Economic Studies

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

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Date Written: August 2014

Abstract

The high pace of reallocation across producers is pervasive in the U.S. economy. Evidence shows this high pace of reallocation is closely linked to productivity. While these patterns hold on average, the extent to which the reallocation dynamics in recessions are "cleansing" is an open question. We find downturns prior to the Great Recession are periods of accelerated reallocation even more productivity enhancing than reallocation in normal times. In the Great Recession, we find the intensity of reallocation fell rather than rose and the reallocation that did occur was less productivity enhancing than in prior recessions.

Suggested Citation

Foster, Lucia and Grim, Cheryl and Haltiwanger, John C., Reallocation in the Great Recession: Cleansing or Not? (August 2014). NBER Working Paper No. w20427. Available at SSRN: https://ssrn.com/abstract=2490837

Lucia Foster (Contact Author)

U.S. Census Bureau - Center for Economic Studies ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

Cheryl Grim

U.S. Census Bureau - Center for Economic Studies ( email )

Suitland Federal Center
Washington, DC 20233
United States

John C. Haltiwanger

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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