description

Market economies are characterized by a continuous reallocation of resources across producers. Some firms grow, some others shrink and even disappear, and new firms come into the market. Evidence shows that this process of reallocation is linked to productivity: resources are shifted away from less efficient firms to more efficient firms; eventually, high productivity producers start selling new products in new, international markets. How did this process change during the Great Recession? Was it a “cleansing” period of increased productivity-enhancing reallocation? And how did it impact on the margins of exporting firms?

The proposal aims to address these questions by comparing the firm-level reallocation dynamics both across time (normal times vs. Great Recession) and across group of heterogeneous firms (exporting vs. non exporting firms). To this end, we use balance sheet and customs data from Italian and French statistical offices, spanning over more than twenty years.

We follow two main lines of research. The first one is meant to characterize the selection process that took place during one of the most severe and persistent post-WWII downturns. In particular, we analyze:

1) how job creation and destruction rates changed;

2) whether the process differed among exporters and non exporters;

3) the relationship between productivity and reallocation, both for exporting and non exporting firms, and the extent to which it changed during the Great Recession.

The second line of research investigates the adjustments that took place, within the subset of exporting firms, during the Great Recession, which also caused a trade collapse. In particular, we analyze:

1) the role of geographical diversification as a potential stabilization channel during severe demand shocks;

2) the role of product diversification and within-firm reallocation across products as anti-cyclical tools to boost efficiency and maintain profit margins.

Results are expected to contribute to at least three streams of literature: the industrial dynamics literature, which looks at how the evolution of industries is shaped by selection mechanisms; the international trade literature, which stresses the differences between exporting and non exporting firms and the different dimensions along which exporters can improve their performance; and the Great Recession literature, which addresses causes and consequences of the recent downturn.