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Firm revenue elasticity and business cycle sensitivity

Kim, Daisoon, Savagar, Anthony (2023) Firm revenue elasticity and business cycle sensitivity. Journal of Economic Dynamics and Control, 154 . Article Number 104722. ISSN 0165-1889. E-ISSN 1879-1743. (doi:10.1016/j.jedc.2023.104722) (KAR id:102279)


We show that it is not necessary to have price and quantity data separately in order to study firm responses to business cycle shocks. We explain that revenue elasticities, which measure the response of firm revenue to input changes and combine price and quantity data, are sufficient to understand business cycle amplification. We present theory to show that higher revenue elasticity firms generate greater business cycle amplification. We use US data to measure revenue elasticities at the firm level, and we show that higher revenue elasticity firms respond more to business cycle shocks, consistent with our theory. We conclude that trends towards lower revenue elasticity firms implies weaker business cycle amplification over time.

Item Type: Article
DOI/Identification number: 10.1016/j.jedc.2023.104722
Uncontrolled keywords: Amplification; Business cycles; Markups; Revenue elasticity; Output elasticity
Subjects: H Social Sciences
H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
SWORD Depositor: JISC Publications Router
Depositing User: JISC Publications Router
Date Deposited: 01 Aug 2023 10:35 UTC
Last Modified: 11 Jan 2024 11:36 UTC
Resource URI: (The current URI for this page, for reference purposes)

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