Changing Business Dynamism and Productivity: Shocks versus Responsiveness

Abstract

The pace of job reallocation has declined in the United States in recent decades. We draw insight from canonical models of business dynamics in which reallocation can decline due to (i ) lower dis persion of idiosyncratic shocks faced by businesses, or (ii ) weaker marginal responsiveness of businesses to shocks. We show that shock dispersion has actually risen, while the responsiveness of business-level employment to productivity has weakened. Moreover, declining responsiveness can account for a significant fraction of the decline in the pace of job reallocation, and we find suggestive evidence this has been a drag on aggregate productivity. (JEL D24, E24, E32, J21, J23, J24, L60)

Dispersion in Dispersion: Measuring Establishment-Level Differences in Productivity

“…For the rest of this section, we consider a few extensions to our analysis to illustrate 28 There is an ongoing debate about the source of the rising dispersion in revenue productivity measures. See, e.g., Bils, Klenow, and Ruane (2020), Blackwood et al (forthcoming) and Decker et al (2020). We do not seek to address that debate here directly but note that Decker et al (2020) find that rising (revenue-based) labor productivity dispersion in manufacturing is present in both the ASM data used here and in administrative data from the Business Register.…”

“…See, e.g., Bils, Klenow, and Ruane (2020), Blackwood et al (forthcoming) and Decker et al (2020). We do not seek to address that debate here directly but note that Decker et al (2020) find that rising (revenue-based) labor productivity dispersion in manufacturing is present in both the ASM data used here and in administrative data from the Business Register. This finding suggests that an increase in measurement error is not driving the rising dispersion.…”

“…Establishment-level productivity differences are also correlated with important economic outcomes at the micro level, such as the survival and growth of establishments. There is an extensive literature on the connection between productivity, reallocation, and growth (Baily, Hulten, and Campbell, 1992;Griliches and Regev, 1995;Foster, Haltiwanger and Krizan, 2001;Petrin, White and Reiter, 2011;Decker et al, 2020;Blackwood et al, forthcoming). These studies show that more productive businesses are more likely to survive and grow.…”

Advanced Technologies Adoption and Use by U.S. Firms: Evidence from the Annual Business Survey

“…Acemoglu and Autor (2011),,Brynjolfsson and Mitchell (2017a),Restrepo (2019), andAgrawal, Gans, and all provide excellent reviews of current and future research issues pertaining to the diffusion of various advanced technologies.6 While high cross-sectional heterogeneity in firm performance is long-established (e.g.,Syverson 2004Syverson & 2011 Hopenhayn 2014), recent studies point to increasing firm heterogeneity along a number of economically important dimensions(Andrews et al 2015;Van Reenen 2018;Song et al 2019;Decker et al 2020;Autor et al 2020;Bennett 2020a), some of which has been linked empirically to IT use(Barth et al 2020; Lashkari et al 2020).…”

Advanced Technologies Adoption and Use by U.S. Firms: Evidence from the Annual Business Survey

“…Acemoglu and Autor (2011),,Brynjolfsson and Mitchell (2017a),Restrepo (2019), andAgrawal, Gans, and all provide excellent reviews of current and future research issues pertaining to the diffusion of various advanced technologies.6 While high cross-sectional heterogeneity in firm performance is long-established (e.g.,Syverson 2004Syverson & 2011 Hopenhayn 2014), recent studies point to increasing firm heterogeneity along a number of economically important dimensions(Andrews et al 2015;Van Reenen 2018;Song et al 2019;Decker et al 2020;Autor et al 2020;Bennett 2020a), some of which has been linked empirically to IT use(Barth et al 2020; Lashkari et al 2020).…”