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SUMMARY:Not-so-Cleansing Recessions - Alessandro Ferrari (Universitat Pomp
 eu Fabra)
DTSTART;VALUE=DATE-TIME:20251125T131500Z
DTEND;VALUE=DATE-TIME:20251125T143000Z
UID:https://talks.ox.ac.uk/talks/id/eaadc520-3309-4110-a320-53e3baaa0bf3/
DESCRIPTION:Recessions are periods in which the least productive firms in 
 the economy exit\, and as the economy recovers\, they are replaced by new 
 and more productive entrants. These cleansing effects improve the average 
 firm productivity. At the same time\, recessions induce a loss of varietie
 s. We show that the long-run welfare effects trade off these two forces. T
 his trade-off is governed by love-of-variety and the elasticity of substit
 ution in aggregate production. If industry output is aggregated with the s
 tandard CES aggregator\, recessions do not bring about any improvement in 
 GDP and welfare. If the economy features more love-of-variety than CES\, t
 he social planner optimally subsidizes economic activity both in steady st
 ate and even more so in recessions to avoid firm exit. We use the model an
 d quasi-exogenous variation in demand to estimate love-of-variety. We find
  it to be significantly higher than implied by CES aggregation\, suggestin
 g that even the long-run effects of recessions are negative. Finally\, we 
 quantitatively characterize the optimal policy response both along the tra
 nsition and in the steady state.\nSpeakers:\nAlessandro Ferrari (Universit
 at Pompeu Fabra)
LOCATION:Manor Road Building (Seminar Room A)\, Manor Road OX1 3UQ
TZID:Europe/London
URL:https://talks.ox.ac.uk/talks/id/eaadc520-3309-4110-a320-53e3baaa0bf3/
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DESCRIPTION:Talk:Not-so-Cleansing Recessions - Alessandro Ferrari (Univers
 itat Pompeu Fabra)
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