Slow Recoveries

37 Pages Posted: 7 Jul 2004 Last revised: 9 Jul 2004

See all articles by Raphael Bergoeing

Raphael Bergoeing

affiliation not provided to SSRN

Norman Loayza

World Bank - Research Department

Andrea Repetto

University of Chile - Engineering Department

Date Written: June 2004

Abstract

Economies respond differently to aggregate shocks that reduce output. While some countries rapidly recover their pre-crisis trend, others stagnate. Recent studies provide empirical support for a link between aggregate growth and plant dynamics through its effect on productivity: the entry and exit of firms and the reallocation of resources from less to more efficient firms explain a relevant part of transitional productivity dynamics. In this paper we use a stochastic general equilibrium model with heterogeneous firms to study the effect on aggregate short-run growth of policies that distort the process of birth, growth and death of firms, as well as the reallocation of resources across economic units. Our findings show that indeed policies that alter plant dynamics can explain slow recoveries. We also find that output losses associated to delayed recoveries are large.

Suggested Citation

Bergoeing, Raphael and Loayza, Norman and Repetto, Andrea, Slow Recoveries (June 2004). NBER Working Paper No. w10584. Available at SSRN: https://ssrn.com/abstract=559234

Raphael Bergoeing (Contact Author)

affiliation not provided to SSRN ( email )

Norman Loayza

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Andrea Repetto

University of Chile - Engineering Department ( email )

Republica 701 Santiago
Chile

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