Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms

Davis, Steven J.; Haltiwanger, John; Jarmin, Ron S.; Miranda, Javier

doi:10.3386/w12354

Cited by 306 publications

(420 citation statements)

References 45 publications

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“…While these measures are correlated, our focus on financial flows and external financing makes our paper different from theirs. Moreover, our firm level employment dynamics closely resembles the evidence documented by Davis et al (2007). Our quantitative exercise is most closely related to Jermann and Quadrini (2011) where shocks to financial constraints cause fluctuations in economic activity.…”

Section: Introductionsupporting

confidence: 69%

“…In our calibration strategy, we have calibrated the productivity process for firms to match external financing by private firm as well the variance of debt to assets. One way to check the validity of our estimates is to compare employment fluctuations in our model to data, as documented by Davis et al (2007). In our calibrated model, the cross-sectional dispersion in employment growth is 0.3 for privately held firms while in data it is 0.4.…”

Section: Calibrationmentioning

confidence: 92%

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External Financing and the Role of Financial Frictions over the Business Cycle: Measurement and Theory

Shourideh

Zetlin‐Jones

2012

SSRN Journal

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We examine the quantitative importance of financial market shocks in accounting for business cycle fluctuations. We emphasize the role financial markets play in reallocating funds from cash-rich, low productivity firms to cash-poor, high productivity firms. Using evidence on financial flows at the firm level, we find that for publicly traded firms (in Compustat), almost all investment is financed internally. However, using an alternative data source (Amadeus), we find that most investment by privately held firms is financed through borrowing. Motivated by these observations, we build a quantitative model featuring publicly and privately held firms that face collateral constraints and idiosyncratic risk over productivity as well as non-financial linkages. In our calibrated model, we find that a shock to the collateral constraints which generates a one standard deviation decline in the debt-to-asset ratio leads to a 0.5% decline in aggregate output on impact, roughly comparable to the effect of a one standard deviation shock to aggregate productivity in a standard real business cycle model. In this sense, we find that disturbances in financial markets are a promising source of business cycle fluctuations when non-financial linkages across firms are sufficiently strong. * We are indebted to V.V. Chari and Larry Jones for valuable advice. We would also like to thank

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Section: Introductionsupporting

confidence: 69%

Section: Calibrationmentioning

confidence: 92%

External Financing and the Role of Financial Frictions over the Business Cycle: Measurement and Theory

Shourideh

Zetlin‐Jones

2012

SSRN Journal

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“…22 Dickens (2000) or Blundell and Preston (1998) are examples showing that the increase in wage and income inequality are partially driven by increases in the transitory component. 23 See the debate between Comin and Philippon (2005) and Davis et al (2006). and between 1998/99 and 2000/01 (the "late period") 24 .…”

Section: Transitory Shocksmentioning

confidence: 99%

“…Comin and Philippon, 2005). Unfortunately, this does not seem to be generally true across the US economy (see Davis et al, 2006). productivity dispersion).…”

Section: Introductionmentioning

confidence: 99%

The evolution of inequality in productivity and wages: panel data evidence

Faggio¹,

Salvanes²,

Reenen

2010

Industrial and Corporate Change

152

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There has been a remarkable increase in wage inequality in the US, UK and many other countries over the past three decades. A significant part of this appears to be within observable groups (such as age-gender-skill cells). A generally untested implication of many theories rationalizing the growth of within-group inequality is that firm-level productivity dispersion should also have increased. Since the relevant data do not exist in the US we utilize a UK longitudinal panel dataset covering the manufacturing and non-manufacturing sectors since the early 1980s. We find evidence that productivity inequality has increased. Existing studies have underestimated this increased dispersion because they use data from the manufacturing sector which has been in rapid decline. Most of the increase in individual wage inequality has occurred because of an increase in inequality between firms (and within industries). Increased productivity dispersion appears to be linked with new technologies as suggested by models such as Caselli (1999) and is not primarily due to an increase in transitory shocks, greater sorting or entry/exit dynamics.

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“…An indirect estimate for the private-sector volatility could be motivated by the work of Davis et al (2006), who use the Longitudinal Business Database (LBD), containing annual observations on employment and payroll for all establishments and firms in the private sector, to estimate the volatility of employment growth rates. They find that, in 2001, the ratio of private to public volatility was in the range 1.43 − 1.75.…”

Section: Parameter Choicementioning

confidence: 99%

Capital Taxation with Entrepreneurial Risk

Panousi

2007

SSRN Journal

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This paper studies the effects of capital taxation in a dynamic heterogeneous-agent economy with uninsurable entrepreneurial risk. Although it allows for rich general-equilibrium effects and a stationary distribution of wealth, the model is highly tractable. This permits a clear analysis, not only of the steady state, but also of the entire transitional dynamics following any change in tax policies. Unlike either the complete-markets paradigm or Bewley-type models where idiosyncratic risk impacts only labor income, here it is shown that capital taxation may actually stimulate capital accumulation. This possibility emerges because of the general-equilibrium effects of the insurance aspect of capital taxation. In particular, for the preferred calibrated version of the model, when the tax on capital is 25%, output per work-hour is 2.2% higher than it would have been had the tax rate been zero. Turning to the welfare effects of a reform in capital taxation, it is examined how these effects depend on whether one focuses on the steady state or also takes into account transitional dynamics, as well as how they vary in the cross-section of the population (rich versus poor, entrepreneurs versus non-entrepreneurs). * Email address: vasia.panousi@frb.gov. I am deeply indebted to my primary advisor George-Marios Angeletos for his constant support and guidance. I am very grateful to my advisors Mike Golosov and Ivan Werning for extremely constructive feedback and discussions. I would like to thank

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Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms

Cited by 306 publications

References 45 publications

External Financing and the Role of Financial Frictions over the Business Cycle: Measurement and Theory

External Financing and the Role of Financial Frictions over the Business Cycle: Measurement and Theory

The evolution of inequality in productivity and wages: panel data evidence

Capital Taxation with Entrepreneurial Risk

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