Working Paper: NBER ID: w24236
Authors: Ryan A. Decker; John C. Haltiwanger; Ron S. Jarmin; Javier Miranda
Abstract: The pace of job reallocation has declined in all U.S. sectors since 2000. In standard models, aggregate job reallocation depends on (a) the dispersion of idiosyncratic productivity shocks faced by businesses and (b) the marginal responsiveness of businesses to those shocks. Using several novel empirical facts from business microdata, we infer that the pervasive post-2000 decline in reallocation reflects weaker responsiveness in a manner consistent with rising adjustment frictions and not lower dispersion of shocks. The within-industry dispersion of TFP and output per worker has risen, while the marginal responsiveness of employment growth to business-level productivity has weakened. The responsiveness in the post-2000 period for young firms in the high-tech sector is only about half (in manufacturing) to two thirds (economy wide) of the peak in the 1990s. Counterfactuals show that weakening productivity responsiveness since 2000 accounts for a significant drag on aggregate productivity.
Keywords: Business dynamism; Productivity; Job reallocation; Adjustment frictions
JEL Codes: D24; E24; J23; L26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| idiosyncratic productivity shocks (O49) | job reallocation (J62) |
| increased adjustment frictions (F16) | weakened responsiveness of businesses to productivity shocks (O49) |
| weakened responsiveness of employment growth to productivity shocks (O49) | drag on aggregate productivity (O49) |
| changing firm age structure due to declining startup rates (L26) | decline in job reallocation rates (J63) |