How firms respond to sudden changes in profitability affects the process of job creation, job destruction, aggregate investment and how fast resources are reallocated in the economy.   Goal of this project is to use new cross-country firm-level data to provide novel insights on how measures of firm responsiveness change over the business cycle and across countries. We study responses both in terms of labor and capital adjustment. Our contribution is to separate firm responsiveness into an extensive and intensive margin component and highlight which margin matters most over the business cycle. Our evidence informs the design of different types of policy support measures during recessionary events.   

Leader: Leonardo Indraccolo 

NPB Collaboration: 

• IMAD (Slovenia)
• UK 
• Italy
• European Commission