Cyclicality of Productivity Dispersion

摘要

Using plant-level data, the author shows that the dispersion of total factor productivity levels in U.S. manufacturing is greater in recessions than in booms. This phenomenon is particularly pronounced in durables and primarily reflects a relatively higher share of unproductive firms in a recession. He constructs a business cycle model where production requires overhead inputs. In a boom, when overhead inputs are more expensive, only more productive firms enter and only more productive incumbents survive, which results in a more compressed productivity distribution. The model endogenously delivers procyclical aggregate total factor productivity, entry, employment and a countercyclical relative price of durables.