Innovation and product reallocation in the great recession

David Argente, Munseob Lee, Sara Moreira

Research output: Contribution to journalArticle

Abstract

We use detailed product- and firm-level data to study the sources of innovation and the patterns of productivity growth over the period from 2007 to 2013. We document several new facts on product reallocation. First, every quarter around 8 percent of products are reallocated in the economy, and the entry and exit of products are prevalent among different types of firms. Second, most reallocation of products occurs within the boundaries of the firm. The entries and exits of firms only make a small contribution in the overall creation and destruction of products. Third, product reallocation is strongly pro-cyclical and declined by more than 25 percent during the Great Recession. This cyclical pattern is almost entirely explained by a decline in within firm reallocation. Motivated by these facts, we study the causes and consequences of reallocation within incumbent firms. As predicted by Schumpeterian growth theories, the rate of product reallocation strongly depends on the innovation efforts of the firms and has important implications for revenue growth, improvements in products’ quality, and productivity dynamics. Our estimates suggest that the decline in product reallocation through these margins has contributed greatly to the slow growth experienced after the Great Recession.

Original languageEnglish (US)
Pages (from-to)1-20
Number of pages20
JournalJournal of Monetary Economics
Volume93
DOIs
StatePublished - Jan 2018

Fingerprint

Reallocation
Innovation
Great Recession
Entry and exit
Firm-level data
Product quality
Productivity
Sources of innovation
Margin
Boundaries of the firm
Revenue growth
Schumpeterian growth
Incumbents
Productivity growth
Growth theory

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Finance

Cite this

Argente, David ; Lee, Munseob ; Moreira, Sara. / Innovation and product reallocation in the great recession. In: Journal of Monetary Economics. 2018 ; Vol. 93. pp. 1-20.
@article{9a8b6d8c8f8e463fa4c643b864e11b03,
title = "Innovation and product reallocation in the great recession",
abstract = "We use detailed product- and firm-level data to study the sources of innovation and the patterns of productivity growth over the period from 2007 to 2013. We document several new facts on product reallocation. First, every quarter around 8 percent of products are reallocated in the economy, and the entry and exit of products are prevalent among different types of firms. Second, most reallocation of products occurs within the boundaries of the firm. The entries and exits of firms only make a small contribution in the overall creation and destruction of products. Third, product reallocation is strongly pro-cyclical and declined by more than 25 percent during the Great Recession. This cyclical pattern is almost entirely explained by a decline in within firm reallocation. Motivated by these facts, we study the causes and consequences of reallocation within incumbent firms. As predicted by Schumpeterian growth theories, the rate of product reallocation strongly depends on the innovation efforts of the firms and has important implications for revenue growth, improvements in products’ quality, and productivity dynamics. Our estimates suggest that the decline in product reallocation through these margins has contributed greatly to the slow growth experienced after the Great Recession.",
author = "David Argente and Munseob Lee and Sara Moreira",
year = "2018",
month = "1",
doi = "10.1016/j.jmoneco.2017.11.003",
language = "English (US)",
volume = "93",
pages = "1--20",
journal = "Journal of Monetary Economics",
issn = "0304-3932",
publisher = "Elsevier",

}

Innovation and product reallocation in the great recession. / Argente, David; Lee, Munseob; Moreira, Sara.

In: Journal of Monetary Economics, Vol. 93, 01.2018, p. 1-20.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Innovation and product reallocation in the great recession

AU - Argente, David

AU - Lee, Munseob

AU - Moreira, Sara

PY - 2018/1

Y1 - 2018/1

N2 - We use detailed product- and firm-level data to study the sources of innovation and the patterns of productivity growth over the period from 2007 to 2013. We document several new facts on product reallocation. First, every quarter around 8 percent of products are reallocated in the economy, and the entry and exit of products are prevalent among different types of firms. Second, most reallocation of products occurs within the boundaries of the firm. The entries and exits of firms only make a small contribution in the overall creation and destruction of products. Third, product reallocation is strongly pro-cyclical and declined by more than 25 percent during the Great Recession. This cyclical pattern is almost entirely explained by a decline in within firm reallocation. Motivated by these facts, we study the causes and consequences of reallocation within incumbent firms. As predicted by Schumpeterian growth theories, the rate of product reallocation strongly depends on the innovation efforts of the firms and has important implications for revenue growth, improvements in products’ quality, and productivity dynamics. Our estimates suggest that the decline in product reallocation through these margins has contributed greatly to the slow growth experienced after the Great Recession.

AB - We use detailed product- and firm-level data to study the sources of innovation and the patterns of productivity growth over the period from 2007 to 2013. We document several new facts on product reallocation. First, every quarter around 8 percent of products are reallocated in the economy, and the entry and exit of products are prevalent among different types of firms. Second, most reallocation of products occurs within the boundaries of the firm. The entries and exits of firms only make a small contribution in the overall creation and destruction of products. Third, product reallocation is strongly pro-cyclical and declined by more than 25 percent during the Great Recession. This cyclical pattern is almost entirely explained by a decline in within firm reallocation. Motivated by these facts, we study the causes and consequences of reallocation within incumbent firms. As predicted by Schumpeterian growth theories, the rate of product reallocation strongly depends on the innovation efforts of the firms and has important implications for revenue growth, improvements in products’ quality, and productivity dynamics. Our estimates suggest that the decline in product reallocation through these margins has contributed greatly to the slow growth experienced after the Great Recession.

UR - http://www.scopus.com/inward/record.url?scp=85038633538&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85038633538&partnerID=8YFLogxK

U2 - 10.1016/j.jmoneco.2017.11.003

DO - 10.1016/j.jmoneco.2017.11.003

M3 - Article

AN - SCOPUS:85038633538

VL - 93

SP - 1

EP - 20

JO - Journal of Monetary Economics

JF - Journal of Monetary Economics

SN - 0304-3932

ER -