Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown
AbstractA 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.
CitationDecker, Ryan A., John Haltiwanger, Ron S. Jarmin, and Javier Miranda. 2017. "Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown." American Economic Review, 107 (5): 322-26. DOI: 10.1257/aer.p20171020
- D22 Firm Behavior: Empirical Analysis
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D61 Allocative Efficiency; Cost-Benefit Analysis
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- L25 Firm Performance: Size, Diversification, and Scope