American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Firms' Internal Networks and Local Economic Shocks
American Economic Review
vol. 109,
no. 10, October 2019
(pp. 3617–49)
Abstract
Using confidential establishment-level data from the US Census Bureau's Longitudinal Business Database, this paper documents how local shocks propagate across US regions through firms' internal networks of establishments. Consistent with a model of optimal within-firm resource allocation, we find that establishment-level employment is sensitive to shocks in distant regions in which the establishment's parent firm is operating, and that the elasticity with respect to such shocks increases with the firm's financial constraint. At the aggregate regional level, we find that aggregate county-level employment is sensitive to shocks in distant counties linked through firms' internal networks.Citation
Giroud, Xavier, and Holger M. Mueller. 2019. "Firms' Internal Networks and Local Economic Shocks." American Economic Review, 109 (10): 3617–49. DOI: 10.1257/aer.20170346Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L22 Firm Organization and Market Structure
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
- R32 Other Spatial Production and Pricing Analysis