Papers Containing Tag(s): 'E32'
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Viewing papers 1 through 10 of 11
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Working PaperThe Effect of Oil News Shocks on Job Creation and Destruction
January 2025
Working Paper Number:
CES-25-06
Using data from the Annual Survey of Manufactures (ASM) and the Census of Manufacturing (CMF), we construct quarterly measures of job creation and destruction by 3-digit NAICS industries spanning from 1980Q3-2016Q4. These long series allow us to address three questions regarding the effect of oil news shocks. What is the average effect of oil news shocks on sectoral labor reallocation? What characteristics explain the observed heterogeneity in the average responses across industries? Has the response of US manufacturing changed over time? We find evidence that oil news shocks exert only a moderate effect on total manufacturing net employment growth but lead to a significant increase in job reallocation. However, we find a high degree of heterogeneity in responses across industries. We then show that the cross-industry variation in the sensitivity of net employment growth and excess job reallocation to oil news shocks is related to differences in energy costs, the rate of energy to capital expenditures, and the share of mature firms in the industry. Finally, we illustrate how the dynamic response of sectoral job creation and destruction to oil news shocks has declined since the mid-2000s.View Full Paper PDF
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Working PaperCompositional Nature of Firm Growth and Aggregate Fluctuations
March 2020
Working Paper Number:
CES-20-09
This paper studies firm dynamics over the business cycle. I present evidence from the United Kingdom that more rapidly growing firms are born in expansions than in recessions. Using administrative records from Census data, I find that this observation also holds for the last four recessions in the United States. I also present suggestive evidence that financial frictions play an important role in determining the types of firms that are born at different stages of the business cycle. I then develop a general equilibrium model in which firms choose their managers' span of control at birth. Firms that choose larger spans of control grow faster and eventually get to be larger, and in this sense have a larger target size. Financial frictions in the form of collateral constraints slow the rate at which firms reach their target size. It takes firms longer to get up to scale when collateral constraints tighten; therefore, businesses with the largest target size are affected disproportionately more. Thus, fewer entrepreneurs find it profitable to choose larger projects when financial conditions deteriorate. Using Bayesian methods, I estimate the model using micro and aggregate data from the United Kingdom. I find that financial shocks account for over 80% of fluctuations in the formation of businesses with a large target size, and TFP and labor wedge shocks account for the remaining 20%. An independently estimated version of the model with no choice over the span of control needs larger aggregate shocks in order to account for the same data series, suggesting that the intensive margin of business formation is important at business cycle frequencies. The model with the choice over the span of control generates an empirically relevant and non-targeted collapse in the right tail of the cumulative growth distribution among firms started in recessions, while the model without such a choice does not. The paper also discusses implications for micro-targeted government stimulus policies.View Full Paper PDF
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Working PaperThe Great Recession and a Missing Generation of Exporters
August 2018
Working Paper Number:
CES-18-33
The collapse of international trade surrounding the Great Recession has garnered significant attention. This paper studies firm entry and exit in foreign markets and their role in the post-recession recovery of U.S. exports using confidential microdata from the U.S. Census Bureau. We find that incumbent exporters account for the vast majority of the decline in export volumes during the crisis. The recession also induced a missing generation of exporters, with large increases in exits and a substantial decline in entries into foreign markets. New exporters during these years tended to have larger export volumes, however, compensating for the decline in the number of exporting firms. Thus, while entry and exit were important for determining the variety of U.S. goods that were exported, they were less important for the trajectory of aggregate foreign sales.View Full Paper PDF
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Working PaperSmall and Large Firms Over the Business Cycle
February 2018
Working Paper Number:
CES-18-09
Drawing on a new, con dential Census Bureau dataset of financial statements of a representative sample of 80000 manufacturing firms from 1977 to 2014, we provide new evidence on the link between size, cyclicality, and financial frictions. First, we only find evidence of lower cyclicality among the very largest firms (the top 1% by size). Second, due to high and rising concentration of sales and investment, the lower sensitivity of the top 1% firms dominates the behavior of aggregate fluctuations. Third, we show that this differential sensitivity does not appear to be driven by financial frictions. The higher sensitivity of the bottom 99% does not disappear after controlling for measures of financial strength, is not statistically significant after identified monetary policy shocks, and does not appear in debt financing flows. Evidence from 3-digit industries suggests a non-financial explanation: the largest 1% of firms are less sensitive due to a more diversified customer base.View Full Paper PDF
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Working PaperThe Long-Run Effects of Recessions on Education and Income
January 2017
Working Paper Number:
CES-17-52
This paper examines the long-run effects of the 1980-1982 recession on education and income. Using confidential Census data, I estimate generalized difference-in-differences regressions that exploit variation across counties in the severity of the recession and across cohorts in age at the time of the recession. I find that children born in counties with a more severe recession are less likely to obtain a college degree and, as adults, earn less income and experience higher poverty rates. The negative effects on college graduation are most severe and essentially constant for individuals age 0-13 in 1979, suggesting that the underlying mechanisms are a decline in childhood human capital or a long-term decline in parental resources to pay for college. I find little evidence that states with more generous or more progressive transfer systems mitigated these long-run effects. The magnitude of my estimates and the large number of affected individuals suggest that the 1980-1982 recession depresses aggregate economic output today.View Full Paper PDF
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Working PaperThe Cyclicality of Productivity Dispersion
May 2011
Working Paper Number:
CES-11-15
Using plant-level data, I show that the dispersion of total factor productivity in U.S. durable manufacturing is greater in recessions than in booms. This cyclical property of productivity dispersion is much less pronounced in non-durable manufacturing. In durables, this phenomenon primarily reflects a relatively higher share of unproductive firms in a recession. In order to interpret these findings, I construct a business cycle model where production in durables requires a fixed input. In a boom, when the market price of this fixed input is high, only more productive firms enter and only more productive incumbents survive, which results in a more compressed productivity distribution. The resulting higher average productivity in durables endogenously translates into a lower average relative price of durables. Additionally, my model is consistent with the following business cycle facts: procyclical entry, procyclical aggregate total factor productivity, more procyclicality in durable than non-durable output, procyclical employment and countercyclicality in the relative price of durables and the cross section of stock returns.View Full Paper PDF
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Working PaperThe Impact of Plant-Level Resource Reallocations and Technical Progress on U.S. Macroeconomic Growth
December 2009
Working Paper Number:
CES-09-43
We build up from the plant level an "aggregate(d) Solow residual" by estimating every U.S. manufacturing plant's contribution to the change in aggregate final demand between 1976 and 1996. We decompose these contributions into plant-level resource reallocations and plant-level technical efficiency changes. We allow for 459 different production technologies, one for each 4- digit SIC code. Our framework uses the Petrin and Levinsohn (2008) definition of aggregate productivity growth, which aggregates plant-level changes to changes in aggregate final demand in the presence of imperfect competition and other distortions and frictions. On average, we find that aggregate reallocation made a larger contribution than aggregate technical efficiency growth. Our estimates of the contribution of reallocation range from 1:7% to2:1% per year, while our estimates of the average contribution of aggregate technical efficiency growth range from 0:2% to 0:6% per year. In terms of cyclicality, the aggregate technical efficiency component has a standard deviation that is roughly 50% to 100% larger than that of aggregate total reallocation, pointing to an important role for technical efficiency in macroeconomic fluctuations. Aggregate reallocation is negative in only 3 of the 20 years of our sample, suggesting that the movement of inputs to more highly valued activities on average plays a stabilizing role in manufacturing growth.View Full Paper PDF
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Working PaperBusiness Volatility, Job Destruction, and Unemployment
August 2008
Working Paper Number:
CES-08-26
Unemployment inflows fell from 4 percent of employment per month in the early 1980s to 2 percent or less by the mid 1990s and thereafter. U.S. data also show a secular decline in the job destruction rate and the volatility of firm-level employment growth rates. We interpret this decline as a decrease in the intensity of idiosyncratic labor demand shocks, a key parameter in search and matching models of unemployment. According to these models, a lower intensity of idiosyncratic shocks produces less job destruction, fewer workers flowing through the unemployment pool and less frictional unemployment. To evaluate the importance of this theoretical mechanism, we relate industry-level unemployment flows from 1977 to 2005 to industry-level indicators for the intensity of idiosyncratic shocks. Unlike previous research, we focus on the lower frequency relationship of job destruction and business volatility to unemployment flows. We find strong evidence that declines in the intensity of idiosyncratic labor demand shocks drove big declines in the incidence and rate of unemployment. This evidence implies that the unemployment rate has become much less sensitive to cyclical movements in the job-finding rate.View Full Paper PDF
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Working PaperEntry, Exit, and Plant-Level Dynamics over the Business Cycle
June 2008
Working Paper Number:
CES-08-17
This paper analyzes the implications of plant-level dynamics over the business cycle. We first document basic patterns of entry and exit of U.S. manufacturing plants, in terms of employment and productivity, between 1972 and 1997. We show how entry and exit patterns vary during the business cycle, and that the cyclical pattern of entry is very different from the cyclical pattern of exit. Second, we build a general equilibrium model of plant entry, exit, and employment and compare its predictions to the data. In our model, plants enter and exit endogenously, and the size and productivity of entering and exiting plants are also determined endogenously. Finally, we explore the policy implications of the model. Imposing a firing tax that is constant over time can destabilize the economy by causing fluctuations in the entry rate. Entry subsidies are found to be effective in stabilizing the entry rate and output.View Full Paper PDF
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Working PaperThe Importance of Reallocations in Cyclical Productivity and Returns to Scale: Evidence from Plant-Level Data
March 2007
Working Paper Number:
CES-07-05
This paper provides new evidence that estimates based on aggregate data will understate the true procyclicality of total factor productivity. I examine plant-level data and show that some industries experience countercyclical reallocations of output shares among firms at different points in the business cycle, so that during recessions, less productive firms produce less of the total output, but during expansions they produce more. These reallocations cause overall productivity to rise during recessions, and do not reflect the actual path of productivity of a representative firm over the course of the business cycle. Such an effect (sometimes called the cleansing effect of recessions) may also bias aggregate estimates of returns to scale and help explain why decreasing returns to scale are found at the industry-level data.View Full Paper PDF
