Recent Trends in the Aggregate Economy from a Firm Perspective: What do we know?

Virtual Mini-Conference

The Faculty of Economics, Cambridge INET, and the Centre for Macroeconomics held the second mini-conference "Recent Trends in the Aggregate Economy from a Firm Perspective: What do we know?" of the 20/21 academic year on 25th May 2021. On this occasion, the conference brought together Andrew G. Atkeson (UCLA), Burcu Eyigungor (Federal Reserve Bank of Philadelphia), and Marc J. Melitz (Harvard University), as speakers, and a long list of participants.

The “New Economy” is changing rapidly. In the last decade, several trends have emerged: increase in inequality, reduction in the labor share, interest rates in the Zero Lower Bound ZLB, increase in firm concentration, reduction in firm entry rates … and the recent global pandemic.

The conference tackled some of these recent trends from a firm perspective, analysing their origin and consequences for the aggregate economy. Marc J. Melitz kicked off the conference by illustrating how entry and exit of firms is amplified by nominal rigidities. Firms’ inability to adjust prices affects their profitability which is then leading to further dynamics in the entry and exit margins. The authors equally illustrate how this mechanism amplifies supply shocks, such as Covid-19. Burcu Eyigungor followed, by illustrating why larger firms tend to be, on average, more leveraged. As firms grow, they have a more diversified product portfolio, minimizing firm volatility, which allows larger firms to hold more debt and still face a lower default risk. Last but not least, Andrew G. Atkeson closed the conference by showcasing the importance of family firms in explaining the evolution of wealth inequality in the United States. Considering family firms also helps understanding the upward and downward moving of families within the wealth distribution.

Organised by: Prof. Vasco Carvalho, Dr. Miguel Ferreira and Dr. Juan Carlos Ruiz Garcia

Venue: Online event (zoom)

Event Date: Tuesday 25th May 2021

Time: 04:00pm - 07:00pm

Event Contact: Marion Reusch - inet@econ.cam.ac.uk

See programme for full details

Speakers:

Marc J. Melitz (Harvard University)
"Aggregate-Demand Amplification of Supply Disruptions: The Entry-Exit Multiplier" (joint with Florin O. Bilbiie) - Paper | Slides

Burcu Eyigungor (Federal Reserve Bank of Philadelphia)
"The Firm Size-Leverage Relationship and Its Implications for Entry and Business Concentration" (joint with Satyajit Chatterjee) - Paper | Slides

Andrew G. Atkeson (UCLA)
"Understanding 100 Years of the Evolution of Top Wealth Shares in the U.S.: What is the Role of Family Firms?" (joint with Magnus Irie) - Paper | Slides