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

67 Pages Posted: 14 Dec 2016 Last revised: 13 Nov 2019

See all articles by Sima Jannati

Sima Jannati

University of Missouri-Columbia

George M. Korniotis

University of Miami; Miami Business School; University of Miami - Behavioral Decision Making Cluster

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). Available at SSRN: https://ssrn.com/abstract=2884737 or http://dx.doi.org/10.2139/ssrn.2884737

Sima Jannati (Contact Author)

University of Missouri-Columbia ( email )

401 Cornell Hall
COLUMBIA, MO 65211
United States

George M. Korniotis

University of Miami ( email )

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

Miami Business School ( email )

University of Miami - Behavioral Decision Making Cluster ( email )

5250 University Drive
Coral Gables, FL 33124
United States

Alok Kumar

University of Miami - Miami Herbert Business School ( email )

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

HOME PAGE: http://moya.bus.miami.edu/~akumar

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