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Big fish in a small pond: Locally dominant firms and the business cycle

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  • Jannati, Sima
  • Korniotis, George
  • Kumar, Alok

Abstract

Following Gabaix (2011), we identify locally dominant firms that have a strong impact on their local macroeconomic environment, but are not among the largest 100 U.S. firms. Idiosyncratic shocks to these locally dominant firms propagate nationally and explain a significant portion of aggregate U.S. macroeconomic fluctuations. Specifically, we find that locally dominant firms exist in 13 U.S. states and productivity shocks to these firms explain almost 50% of the U.S. GDP growth.

Suggested Citation

  • Jannati, Sima & Korniotis, George & Kumar, Alok, 2020. "Big fish in a small pond: Locally dominant firms and the business cycle," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 219-240.
    • Handle: RePEc:eee:jeborg:v:180:y:2020:i:c:p:219-240
    DOI: 10.1016/j.jebo.2020.10.004
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    2. Jorge Miranda‐Pinto & Yuanting Shen, 2019. "A Granular View of the Australian Business Cycle," The Economic Record, The Economic Society of Australia, vol. 95(311), pages 407-424, December.
    3. Ling Zhang, 2024. "Spatial agglomeration of information services industry and its evolution: Evidence from the Pearl River Delta, China," Growth and Change, Wiley Blackwell, vol. 55(1), March.

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    More about this item

    Keywords

    Idiosyncratic shocks; State-level business cycle; U.S. business cycle; Economic contagion;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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