Working Paper
Slow convergence in economies with firm heterogeneity
Abstract: This paper presents a simple formula that relates the tail index of the firm size distribution to the aggregate speed with which an economy converges to its balanced growth path. The fact that there are so many firms in the right tail implies that aggregate shocks that permanently destroy employment among incumbent firms, rather than cause these firms to scale back temporarily, are followed by slow recoveries. This is true despite the existence of many rapidly growing firms.
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Bibliographic Information
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Working Papers
Publication Date: 2012
Number: 696