Capital Reallocation and the Cyclicality of Aggregate Productivity / Russell W. Cooper, Immo Schott.

Format:

Book

Author/Creator:

Cooper, Russell W.

Contributor:

National Bureau of Economic Research.

Schott, Immo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19715.

NBER working paper series no. w19715

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

A large part of the existing stock of capital is frequently reallocated between firms. This capital reallocation is procyclical and leads to variations in measured aggregate productivity. In this paper we ask how much of the cyclical variation in measured productivity is the consequence of capital reallocation. We study a heterogeneous-firm model that generates both realistic amounts of capital reallocation, as well as the observed relationship between the intensive and extensive margins of reallocation. We investigate the effects of exogenous shocks to total factor productivity (TFP) and to the costs of reallocation. These shocks induce changes in the amount of capital reallocation and thus cause an endogenous cyclicality of measured aggregate productivity. We find that only a model driven by exogenous TFP shocks is able to generate both data-consistent cyclical movements in reallocation and sizeable variations in measured aggregate productivity.

Notes:

Print version record

December 2013.