Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown

A large literature documents declining measures of business dynamism including high-growth young firm activity and job reallocation. A distinct literature describes a slowdown in the pace of aggregate labor productivity growth. We relate these patterns by studying changes in productivity growth from...

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Bibliographic Details
Published in:The American economic review 2017-05, Vol.107 (5), p.322-326
Main Authors: Decker, Ryan A., Haltiwanger, John, Jarmin, Ron S., Miranda, Javier
Format: Article
Language:English
Subjects:
Allocative efficiency
Business entities
Covariance
Economic models
Efficiency
Employment
ENTREPRENEURSHIP, FIRM DYNAMICS, AND GROWTH
Industrial output
Industrial productivity
Industry
Labor productivity
Productivity
Productivity growth
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Summary:A large literature documents declining measures of business dynamism including high-growth young firm activity and job reallocation. A distinct literature describes a slowdown in the pace of aggregate labor productivity growth. We relate these patterns by studying changes in productivity growth from the late 1990s to the mid 2000s using firm-level data. We find that diminished allocative efficiency gains can account for the productivity slowdown in a manner that interacts with the within-firm productivity growth distribution. The evidence suggests that the decline in dynamism is reason for concern and sheds light on debates about the causes of slowing productivity growth.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.p20171020