Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown

Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda

doi:10.1257/aer.p20171020

Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown

Ryan A. Decker¹; John Haltiwanger²; Ron S. Jarmin³; Javier Miranda³

¹ Board of Governors of the Federal Reserve, Mailstop 82, 20th Street and C Street NW, Washington, DC 20551 (e-mail: ) · ² Department of Economics, University of Maryland, College Park, MD 20742 (e-mail: ) · ³ US Census Bureau, 4600 Silver Hill Road, Washington, DC 20233 (e-mail: )

American Economic Review 2017 open access

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.

DOI: 10.1257/aer.p20171020
Volume: 107 (5)
Pages: 322-326
Language: en
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