This paper shows the importance of technological synergies among heterogeneous firms for aggregate fluctuations. First, we document six novel empirical facts using microdata that suggest the existence of important technological synergies between trading firms, the presence of positive assortative matching among firms, and their evolution during the business cycle. Next, we embed technological synergies in a general equilibrium model calibrated on firm-level data. We show that frictions in forming trading relationships and separation costs explain imperfect sorting between firms in equilibrium. In particular, an increase in the volatility of idiosyncratic productivity shocks significantly decreases aggregate output without resorting to non-convex adjustment costs.
Authors
- Acknowledgements & Disclosure
- We thank Nick Bloom, Linyi Cao, Larry Christiano, Stephen Davis, Martin Eichenbaum, Joel David, Xavier Gabaix, Mark Gertler, Rasmus Lentz, Matthew McKernan, Junhui Qian, Xi Qu, Michael Zheng Song, Harald Uhlig, Yi Wen, Le Xu, Qinshu Xue, Biao Yang, Yiran Zhang, and participants at multiple seminars and conferences for valuable comments and suggestions. The usual disclaimer applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. Zanetti gratefully acknowledges financial support from the British Academy.
- DOI
- https://doi.org/10.3386/w32247
- Published in
- United States of America
