A Theory of Growth and Volatility at the Aggregate and Firm Level

This paper presents an endogenous growth model that explains the evolution of the first and second moments of productivity growth at the aggregate and firm level during the post-war period. Growth is driven by the development of both (i) idiosyncratic R&D innovations and (ii) general innovations that can be freely adopted by many firms. Firm-level volatility is affected primarily by the Schumpeterian dynamics associated with the development of R&D innovations. On the other hand, the variance of aggregate productivity growth is determined mainly by the arrival rate of general innovations. Ceteris paribus, the share of resources spent on development of general innovations increases with the stability of the market share of the industry leader. As market shares become less persistent, the model predicts an endogenous shift in the allocation of resources from the development of general innovations to the development of R&D innovations. This results in an increase in R&D, an increase in firm-level volatility, and a decline in aggregate volatility. The effect on productivity growth is ambiguous. On the empirical side, this paper documents an upward trend in the instability of market shares. It shows that firm volatility is positively associated with R&D spending, and that R&D is negatively associated with the correlation of growth between sectors which leads to a decline in aggregate volatility.

Diverging Trends in Macro and Micro Volatility: Facts

This paper documents the diverging trends in volatility of the growth rate of sales at the aggregate and firm level. We establish that the upward trend in micro volatility is not simply driven by a compositional bias in the sample studied. We argue that this new fact sheds some shadows on the proposed explanations for the decline in aggregate volatility and that, given the symmetry of the diverging trends at the micro and macro level, a common explanation is likely. We conclude by describing one such theory.

Diverging Trends in Macro and Micro Volatility: Facts

In this paper we document the diverging trends in volatility of the growth rate of sales at the aggregate and firm level. The upward trend in micro volatility is not driven by a compositional bias in the sample studied. We also show that many other firm level variables display a similar upward trend in volatility. Finally, we argue that this new fact renders obsolete the proposed explanations for the decline in aggregate volatility and that, given the symmetry of the patterns at the micro and macro level, a common explanation is highly likely.Macro Volatility and Micro Volatility

Diverging Trends in Macro and Micro Volatility: Facts

In this paper, we document the diverging trends in volatility of the growth rate of sales at the aggregate and firm level. We establish that the upward trend in micro volatility is not simply driven by a compositional bias in the sample studied. We argue that this new fact renders obsolete the proposed explanations for the decline in aggregate volatility and that, given the symmetry of the diverging trends at the micro and macro level, a common explanation is highly likely. We conclude by describing one such theory driven by market integration

Proceedings of National Conference on Relevance of Engineering and Science for Environment and Society

This conference proceedings contains articles on the various research ideas of the academic community and practitioners presented at the National Conference on Relevance of Engineering and Science for Environment and Society (R{ES}2 2021). R{ES}2 2021 was organized by Shri Pandurang Pratishthan’s, Karmayogi Engineering College, Shelve, Pandharpur, India on July 25th, 2021. Conference Title: National Conference on Relevance of Engineering and Science for Environment and SocietyConference Acronym: R{ES}2 2021Conference Date: 25 July 2021Conference Location: Online (Virtual Mode)Conference Organizers: Shri Pandurang Pratishthan’s, Karmayogi Engineering College, Shelve, Pandharpur, India