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Technological synergies, heterogeneous firms, and idiosyncratic volatility

Fernandez Villaverde, J. and Yu, Y. and Zanetti, F. (2024) Technological synergies, heterogeneous firms, and idiosyncratic volatility. Working Paper. Birkbeck Centre for Applied Macroeconomics, London, UK. (Unpublished)

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Abstract

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.

Metadata

Item Type: Monograph (Working Paper)
Additional Information: BCAM Working Paper #2401. ISSN: 1745-8587
School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
Research Centres and Institutes: Applied Macroeconomics, Birkbeck Centre for
Depositing User: Yunus Aksoy
Date Deposited: 31 May 2024 15:17
Last Modified: 12 Apr 2025 07:31
URI: https://eprints.bbk.ac.uk/id/eprint/53370

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