Skewed Business Cycles / Sergio Salgado, Fatih Guvenen, Nicholas Bloom.

Format:

Book

Author/Creator:

Salgado, Sergio.

Contributor:

National Bureau of Economic Research.

Guvenen, Fatih.

Bloom, Nicholas.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26565.

NBER working paper series no. w26565

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

Using firm-level panel data from the US Census Bureau and almost fifty other countries, we show that the skewness of the growth rates of employment, sales, and productivity is procyclical. In particular, during recessions, they display a large left tail of negative growth rates (and during booms, a large right tail of positive growth rates). We find similar results at the industry level: industries with falling growth rates see more left-skewed growth rates of firm sales, employment, and productivity. We then build a heterogeneous-agent model in which entrepreneurs face shocks with time-varying skewness that matches the firm-level distributions we document for the United States. Our quantitative results show that a negative shock to the skewness of firms' productivity growth (keeping the mean and variance constant) generates a persistent drop in output, investment, hiring, and consumption. This suggests the rising risk of large negative firm-level shocks could be an important factor driving recessions.

Notes:

Print version record

December 2019.