Slow recoveries |
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| Institution: | 1. Dpto. de Ingeneria Industrial, Centro de Economía Aplicada, Universidad de Chile, Santiago 701, Chile;2. The World Bank, USA;1. Departamento de Química Inorgánica, Facultad de Química y de Farmacia, Pontificia Universidad Católica de Chile, Vicuña Mackenna 4860, Macul, Santiago, Chile;2. Departamento de Ciencias Químicas y Biológicas, Universidad Bernardo O`Higgins, General Gana 1702, Santiago, Chile;3. Organisch-Chemisches Institut, Westfälische Wilhelm-Universität, Corrensstrasse 40, 48149 Münster, Germany;1. University of La Rochelle, France;2. University of York, United Kingdom;1. Department of Political Science, University of Pittsburgh, 4600 Wesley W. Posvar Hall, Pittsburgh, PA 15260, USA;2. Department of Political Science, Wake Forest University, Box 7568, Kirby Hall 308, Winston-Salem, NC 27109, USA;1. Hydrates, Flow Assurance & Phase Equilibria Research Group, Institute of Petroleum Engineering, Heriot-Watt University, Edinburgh, Scotland, UK;2. Mines Paristech, CTP – Centre Thermodynamique des procédés, 35 rue St Honoré, 77305 Fontainebleau, France;3. Statoil ASA, N-7005 Trondheim, Norway |
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| Abstract: | Economies respond differently to aggregate shocks that reduce output. While some countries rapidly recover their pre-crisis trend, others stagnate. Recent studies provide empirical support for a link between aggregate growth and plant dynamics through its effect on productivity: the entry and exit of firms and the reallocation of resources from less to more efficient firms explain a relevant part of transitional productivity dynamics. In this paper, we use a stochastic general equilibrium model with heterogeneous firms to study the effect on aggregate short-run growth of policies that distort the process of birth, growth, and death of firms, as well as the reallocation of resources across economic units. Our findings show that indeed policies that alter plant dynamics can explain slow recoveries. We also find that output losses associated to delayed recoveries are large. |
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