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Superstar firms and aggregate fluctuations

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Abstract

The rise of market power in the last decades is primarily driven by the largest firms. We propose a theory of these superstar firms in which their technology involves the ability to produce multiple products. Superstars interact with smaller competitors and market share reallocations and product creation generate heterogeneous markup dynamics across firms. Higher market shares of superstars increase the parameter space for macroeconomic indeterminacy. Bayesian estimation of the general equilibrium model suggests the importance of the endogenous amplification of the product creation channel and animal spirits play a non-trivial role in driving U.S. business cycles.

Suggested Citation

  • Pavlov, Oscar & Haque, Qazi & Weder, Mark, 2024. "Superstar firms and aggregate fluctuations," Working Papers 2024-01, University of Tasmania, Tasmanian School of Business and Economics.
    • Handle: RePEc:tas:wpaper:25247530
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    More about this item

    Keywords

    uncategorised value; superstars; multi-product firms; business cycles; animal spirits; Bayesian estimation;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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