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Large Firms and the Cyclicality of US Labour Productivity

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Abstract

We present novel stylized facts on the declining cyclicality of labour productivity for large firms. Changes in their output-labour productivity correlations are close to those observed in the aggregate data, unlike small firms. We find support for the hypothesis that this change is driven by increased labour market flexibility. In response to a 1% increase in real sales large firms’ hire an additional 75 workers in the pre-1985 period, compared to an additional 90 workers in the post-1985 period. Our findings are of direct relevance to the growing literature on the role of large firms in driving US business cycles.

Suggested Citation

  • Joshua Brault & Hashmat Khan, 2021. "Large Firms and the Cyclicality of US Labour Productivity," Carleton Economic Papers 21-02, Carleton University, Department of Economics, revised 27 May 2021.
    • Handle: RePEc:car:carecp:21-02
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    More about this item

    Keywords

    Large Firms; Labour Productivity; Business Cycles;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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