Multi-product firms and business cycle dynamics
-
Antonio Minniti [1] ; Francesco Turino [2]
-
[1] University of Bologna
University of Bologna
Bolonia, Italia
-
[2] Universitat d'Alacant
Universitat d'Alacant
Alicante, España
-
- Localización: Working papers = Documentos de trabajo: Serie AD, Nº. 20, 2011, págs. 1-30
- Idioma: inglés
- Enlaces
-
Resumen
Recent empirical evidence provided by Bernard et al. (2010) and Broda and Weinstein (2010) shows that a significant share of product creation and destruction in U.S. industries occurs within existing firms and accounts for a relevant share of aggregate output. In the present paper, and consistently with this evidence, we relax the standard assumption of mono-product firms that is typically made in dynamic general equilibrium models. Building on the work of Jaimovich and Floetotto (2008), we develop an RBC model with multi-product firms and endogenous markups to assess the implications of the intra-firm extensive margin on business cycle fluctuations. In this environment, the procyclicality of product creation emerges as a consequence of strategic interactions among firms. Because of the proliferation effect induced by changes in product scope, our model embodies a quantitatively important magnification mechanism of technology shocks.
