CREAT: Census Research Exploration and Analysis Tool

The Reallocation Myth

April 2018

Working Paper Number:

CES-18-19

Abstract

There is a widely held view that much of growth in the U.S. can be attributed to reallocation from low to high productivity firms, including from exiting firms to entrants. Declining dynamism ' falling rates of reallocation and entry/exit in the U.S. ' have therefore been tied to the lackluster growth since 2005. We challenge this view. Gaps in the return to resources do not appear to have narrowed, suggesting that allocative efficiency has not improved in the U.S. in recent decades. Reallocation can also matter if it is a byproduct of innovation. However, we present evidence that most innovation comes from existing firms improving their own products rather than from entrants or fast-growing firms displacing incumbent firms. Length: 26 pages

Document Tags and Keywords

Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the text, highlighting the most significant topics and trends. This approach not only enhances searchability but provides connections that go beyond potentially domain-specific author-defined keywords.
:
investment, productive, enterprise, company, productivity growth, growth, monopolistic, produce, efficiency, growth productivity, strategic, innovation, innovator, innovate, reallocation productivity, competitor, productivity firms, productivity dispersion, declining, relocation, innovative, innovating

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:
Annual Survey of Manufactures, Bureau of Labor Statistics, Center for Economic Studies, Total Factor Productivity, Federal Reserve Bank, Longitudinal Business Database, Wal-Mart, Economic Census

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