Geographic Spillover of Dominant Firms' Shocks
60 Pages Posted: 26 Jan 2017 Last revised: 22 Jul 2019
Date Written: July 22, 2019
This paper shows that productivity shocks to the 100 largest U.S. firms (by revenue) contain systematic information. Specifically, shocks to the top-100 firms predict future shocks to geographically close firms. Intra-sector trade links are an important economic channel for spillover effects. However, these spillovers are not restricted to firms' trade links only. Knowledge externalities and state income tax payments of the top-100 firms are other economic channels through which shocks propagate. Overall, the results show how productivity shocks to the few largest firms in the U.S. spillover to other firms and potentially aggregate to affect the national economy.
Keywords: top 100 firms; idiosyncratic shocks; systematic information; geographic spillover
JEL Classification: G02; G14; G24
Suggested Citation: Suggested Citation