The Macroeconomic Implications of Firm Selection

Cooke, Dudley; Damjanovic, Tatiana

The Macroeconomic Implications of Firm Selection

Cooke, Dudley; Damjanovic, Tatiana

Authors

Dudley Cooke

Professor Tatiana Damjanovic tatiana.damjanovic@durham.ac.uk
Professor

Abstract

This paper studies the macroeconomic implications of firm selection in a model with monopolistic competition and translog preferences. Firm selection magnifies the impact of aggregate technology shocks. Magnification is limited by diminishing returns to new varieties and misallocation. We provide analytical results linking selection, diminishing returns, and misallocation with measured total factor productivity (TFP) and the distribution of firm-level productivity. A calibrated version of our model suggests the contribution of firm selection to variations in TFP is over 20 percent.

Citation

Cooke, D., & Damjanovic, T. (2018). The Macroeconomic Implications of Firm Selection

Publication Date	Jan 1, 2018
Deposit Date	May 23, 2019
Publicly Available Date	May 23, 2019
Series Title	Durham University Business School working papers series
Public URL	https://durham-repository.worktribe.com/output/1168786
Publisher URL	https://www.dur.ac.uk/business/research/economics/working-papers/