The Conglomerate Network / Kenneth R. Ahern, Lei Kong, Xinyan Yan.

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Ahern, Kenneth R

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w28837.Publication details: Cambridge, Mass. National Bureau of Economic Research 2021.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper proposes a network model of the economy in which conglomerate firms transmit idiosyncratic shocks from one industry to another. The strength of inter-industry connections is determined by the conglomerate's share of total industry sales and by the industry's share of the conglomerate's total sales. The empirical results show that industry growth rates comove more strongly within industry pairs that are more closely connected in the conglomerate network. These results hold after controlling for industry-pair and year fixed effects, input-output connections, reverse causality, and in tests that exploit exogenous cross-sectional industry shocks from import tariff changes. Finally, our model also provides a new cross-industry extension for the widely-used Herfindahl index of concentration.

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Working Paper	Biblioteca Digital	Colección NBER	nber w28837 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w28834 Heterogeneous Global Booms and Busts /	nber w28835 Distributional Impacts of Retail Vaccine Availability /	nber w28836 The Inflation Expectations of U.S. Firms: Evidence from a new survey /	nber w28837 The Conglomerate Network /	nber w28838 A Welfare Analysis of Tax Structures with Love-of-Variety Preferences /	nber w28839 Redesigning the Longitudinal Business Database /	nber w2884 Measurement Error In Cross-Sectional and Longitudinal Labor Market Surveys: Results From Two Validation Studies /	Next

May 2021.

This paper proposes a network model of the economy in which conglomerate firms transmit idiosyncratic shocks from one industry to another. The strength of inter-industry connections is determined by the conglomerate's share of total industry sales and by the industry's share of the conglomerate's total sales. The empirical results show that industry growth rates comove more strongly within industry pairs that are more closely connected in the conglomerate network. These results hold after controlling for industry-pair and year fixed effects, input-output connections, reverse causality, and in tests that exploit exogenous cross-sectional industry shocks from import tariff changes. Finally, our model also provides a new cross-industry extension for the widely-used Herfindahl index of concentration.