The German Manufacturing Sector is a Granular Economy

14 Pages Posted: 28 Nov 2011

See all articles by Joachim Wagner

Joachim Wagner

University of Lueneburg - Institute of Economics; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics; IZA Institute of Labor Economics

Abstract

Using the approach suggested by Gabaix (Econometrica 2011) this paper demonstrates that idiosyncratic shocks in the largest firms are important for an understanding of aggregate volatility in German manufacturing industries. The implications of this finding for theoretical and empirical research and for economic policy are discussed.

Keywords: power law, idiosyncratic shocks, granular residual, Germany

JEL Classification: E32

Suggested Citation

Wagner, Joachim, The German Manufacturing Sector is a Granular Economy. IZA Discussion Paper No. 6115, Available at SSRN: https://ssrn.com/abstract=1965132

Joachim Wagner (Contact Author)

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