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Slow Recoveries

Listed author(s):
  • Raphael Bergoeing
  • Norman Loayza

Economies respond differently to aggregate shocks that reduce output. While some countries rapidly recover their pre-crisis trend, others stagnate. Recent studies provide empirical support for a connection between aggregate growth and plant dynamics through their effect on productivity: the entry and exit of firms and the reallocation of resources from less to more efficient firms explain a relevant part of transitional productivity dynamics. In this paper we use a stochastic general equilibrium model with heterogeneous firms to study the effect on aggregate short-run growth of policies that distort the process of birth, growth and death of firms, as well as the reallocation of resources across economic units. Our findings show that indeed, policies that alter plant dynamics can explain slow recoveries. Associated output losses are large

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Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 244.

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Date of creation: 2004
Handle: RePEc:red:sed004:244
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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