Changing Business Dynamism and Productivity: Shocks vs. Responsiveness

67 Pages Posted: 7 Feb 2018

See all articles by Ryan Decker

Ryan Decker

Board of Governors of the Federal Reserve System

John Haltiwanger

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

Ron S. Jarmin

U.S. Census Bureau

Javier Miranda

U.S. Census Bureau - Center for Administrative Records Research and Applications

Multiple version iconThere are 2 versions of this paper

Date Written: 2018-02-02

Abstract

The pace of job reallocation has declined in all U.S. sectors since 2000. In standard models, aggregate job reallocation depends on (a) the dispersion of idiosyncratic productivity shocks faced by businesses and (b) the marginal responsiveness of businesses to those shocks. Using several novel empirical facts from business microdata, we infer that the pervasive post-2000 decline in reallocation reflects weaker responsiveness in a manner consistent with rising adjustment frictions and not lower dispersion of shocks. The within-industry dispersion of TFP and output per worker has risen, while the marginal responsiveness of employment growth to business-level productivity has weakened. The responsiveness in the post-2000 period for young firms in the high-tech sector is only about half (in manufacturing) to two thirds (economy wide) of the peak in the 1990s. Counterfactuals show that weakening productivity responsiveness since 2000 accounts for a significant drag on a ggregate productivity.

Keywords: Dynamism, Entrepreneurship, Job reallocation, Labor supply and demand, Productivity

JEL Classification: J23, D22, O47, E24, D24, L26, M13

Suggested Citation

Decker, Ryan and Haltiwanger, John C. and Jarmin, Ron S. and Miranda, Javier, Changing Business Dynamism and Productivity: Shocks vs. Responsiveness (2018-02-02). FEDS Working Paper No. 2018-007. Available at SSRN: https://ssrn.com/abstract=3119555 or http://dx.doi.org/10.17016/FEDS.2018.007

Ryan Decker (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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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 )

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

P.O. Box 7240
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Ron S. Jarmin

U.S. Census Bureau ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

Javier Miranda

U.S. Census Bureau - Center for Administrative Records Research and Applications ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

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