Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/173768
Authors: 
Magerman, Glenn
De Bruyne, Karolien
Dhyne, Emmanuel
Van Hove, Jan
Year of Publication: 
2016
Series/Report no.: 
NBB Working Paper 312
Abstract: 
This paper evaluates the impact of idiosyncratic productivity shocks to individual firms on aggregate output. Two sources of firm-level heterogeneity contribute to aggregate fluctuations: (i) asymmetries in supplier-buyer relationships and (ii) the skewed distribution of sales to final demand. We first develop a model with monopolistic competitive firms and derive a generalized centrality measure that takes these two sources of heterogeneity into account. The model is subsequently estimated using unique data on firm-to-firm transactions across all economic activities in Belgium. The model generates aggregate volatility from micro origins in the same order of magnitude as observed volatility in GDP. The top 100 firms contribute to 90% of the volatility generated by the model, underlining a strong granularity of the economy. Counterfactual analysis further shows that both sources of micro heterogeneity contribute substantially to aggregate fluctuations, while the relative contribution of each channel crucially depends on the labor share in the economy.
Subjects: 
Heterogeneous firms
networks
input-output linkages
aggregate volatility
JEL: 
E3
L1
Document Type: 
Working Paper
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