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On the macroeconomic effects of heterogeneous productivity shocks

Listed author(s):
  • Jensen Christian

    ()

    (Department of Economics, University of South Carolina, 1014 Greene Street, SC 29208, Columbia)

The conventional wisdom that producer heterogeneity washes out, and is therefore irrelevant for the aggregate economy, does not apply when producers compete monopolistically. Despite this, the effects of such heterogeneity can be reproduced with an appropriately redefined representative-agent framework where the equilibrium values of aggregates are expressed in terms of the moment generating function of the distribution of heterogeneity, or its asymptotic distribution. Increased heterogeneity raises aggregate productivity and production, more so the fiercer competition is. We propose a framework where the entire distribution of heterogeneity matters, yet computationally requires no more than a representative-agent model.

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File URL: https://www.degruyter.com/view/j/bejm.2016.16.issue-1/bejm-2013-0160/bejm-2013-0160.xml?format=INT
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Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 16 (2016)
Issue (Month): 1 (January)
Pages: 1-23

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Handle: RePEc:bpj:bejmac:v:16:y:2016:i:1:p:1-23:n:2
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  1. Miao, Jianjun, 2006. "Competitive equilibria of economies with a continuum of consumers and aggregate shocks," Journal of Economic Theory, Elsevier, vol. 128(1), pages 274-298, May.
  2. Russell W. Cooper & Immo Schott, 2013. "Capital Reallocation and Aggregate Productivity," NBER Working Papers 19715, National Bureau of Economic Research, Inc.
  3. Gian Luca Clementi & Dino Palazzo, 2010. "Entry, Exit, Firm Dynamics, and Aggregate Fluctuations," Working Paper Series 27_10, The Rimini Centre for Economic Analysis.
  4. Yoonsoo Lee, 2005. "The importance of reallocations in cyclical productivity and returns to scale: evidence from plant-level data," Working Paper 0509, Federal Reserve Bank of Cleveland.
  5. Aubhik Khan & Julia K. Thomas, 2008. "Idiosyncratic Shocks and the Role of Nonconvexities in Plant and Aggregate Investment Dynamics," Econometrica, Econometric Society, vol. 76(2), pages 395-436, 03.
  6. Eric J. Bartelsman & Zoltan Wolf, 2014. "Forecasting Aggregate Productivity Using Information from Firm-Level Data," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 745-755, October.
  7. Kyoji Fukao & Hyeog Ug Kwon, 2006. "Why Did Japan'S Tfp Growth Slow Down In The Lost Decade? An Empirical Analysis Based On Firm-Level Data Of Manufacturing Firms," The Japanese Economic Review, Japanese Economic Association, vol. 57(2), pages 195-228.
  8. Matthias Kehrig, 2011. "The Cyclicality of Productivity Dispersion," 2011 Meeting Papers 484, Society for Economic Dynamics.
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