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- Title
On the macroeconomic effects of heterogeneous productivity shocks.
- Authors
Jensen, Christian
- Abstract
The conventional wisdom that producer heterogeneity washes out, and is therefore irrelevant for the aggregate economy, does not apply when producers compete monopolistically. Despite this, the effects of such heterogeneity can be reproduced with an appropriately redefined representative-agent framework where the equilibrium values of aggregates are expressed in terms of the moment generating function of the distribution of heterogeneity, or its asymptotic distribution. Increased heterogeneity raises aggregate productivity and production, more so the fiercer competition is. We propose a framework where the entire distribution of heterogeneity matters, yet computationally requires no more than a representative-agent model.
- Subjects
MACROECONOMICS; ECONOMIC shock; INDUSTRIAL productivity; COBB-Douglas production function; ECONOMIC activity
- Publication
B.E. Journal of Macroeconomics, 2016, Vol 16, Issue 1, p1
- ISSN
2194-6116
- Publication type
Article
- DOI
10.1515/bejm-2013-0160