Big fish in a small pond: Locally dominant firms and the business cycle

Research output: Contribution to journalArticlepeer-review

Abstract

Following Gabaix (2011), we identify locally dominant firms that have a strong impact on their local macroeconomic environment, but are not among the largest 100 U.S. firms. Idiosyncratic shocks to these locally dominant firms propagate nationally and explain a significant portion of aggregate U.S. macroeconomic fluctuations. Specifically, we find that locally dominant firms exist in 13 U.S. states and productivity shocks to these firms explain almost 50% of the U.S. GDP growth.

Original languageEnglish (US)
Pages (from-to)219-240
Number of pages22
JournalJournal of Economic Behavior and Organization
Volume180
DOIs
StatePublished - Dec 2020

Keywords

  • Economic contagion
  • Idiosyncratic shocks
  • State-level business cycle
  • U.S. business cycle

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

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