Firm heterogeneity and regional business cycles differentials

摘要

We analyze the effect of firm heterogeneity on regional business cycle differentials. Using monthly firm-level data for Italy and estimating discrete-response models, we document sizeable and countercyclical differences in amplitude between the Northern and the Southern business cycles. We explore the role of sectoral mix and several firmspecific factors in explaining regional business cycle gaps. Results suggest that regional differences in sectoral composition are not responsible for these discrepancies, whereas firm-level heterogeneity explains 50% of the North-South gap. These results are robust to controlling for (i) firm fixed effects, (ii) spatial fixed effects and (iii) simultaneity bias.