Product Switching and the Business Cycle

33 Pages Posted: 20 Sep 2016

See all articles by Andrew B. Bernard

Andrew B. Bernard

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Toshihiro Okubo

Keio University

Multiple version iconThere are 2 versions of this paper

Date Written: September 2016

Abstract

This paper explores role of product adding and dropping within manufacturing firms over the business cycle. While a substantial body of work has explored the importance of the extensive margins of firm entry and exit in employment and output flows, only recently has research begun to examine the adjustment across products within firms and its importance for firm and aggregate output and employment flows. Using a novel, annual firm-product data set covering all Japanese manufacturing firms with more than 4 employees from 1992 to 2006, we provide the first evidence on annual changes in product adding and dropping by continuing firms over the business cycle. We find very high rates of product adding and dropping by continuing firms between the last year of the recession and the first year of the subsequent expansion and offer an explanation and supporting evidence based on a “trapped factors” model of firm behavior.

Suggested Citation

Bernard, Andrew B. and Okubo, Toshihiro, Product Switching and the Business Cycle (September 2016). NBER Working Paper No. w22649. Available at SSRN: https://ssrn.com/abstract=2840597

Andrew B. Bernard (Contact Author)

Dartmouth College - Tuck School of Business ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-0302 (Phone)
603-646-9084 (Fax)

HOME PAGE: http://mba.tuck.dartmouth.edu/pages/faculty/Andrew.Bernard/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Toshihiro Okubo

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

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