Finance and Economics Discussion Series (FEDS)

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February 2017

Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown

Ryan A. Decker, John Haltiwanger, Ron S. Jarmin, and Javier Miranda

Abstract:

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.

Accessible materials (.zip)

Keywords: Job reallocation, Labor supply and demand, Productivity

DOI: https://doi.org/10.17016/FEDS.2017.019

PDF: Full Paper

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Last Update: March 13, 2020