Study: Firm-specific Shocks and Aggregate Fluctuations in the Canadian Manufacturing Sector, 2000 to 2012
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Over the 2000 to 2012 period, between about one-quarter and almost one-half of the annual variation in Canadian manufacturing sales growth can be accounted for by firm-specific shocks.
A new study examines whether shocks specific to individual firms, measured as the difference between an individual firm's growth rate and the average growth rate of firms in the same industry, contribute to aggregate movements in the manufacturing sector in terms of sales, investment and employment growth.
The study is based on data from the T2-Longitudinal Employment Analysis Program (LEAP), which link financial statements from the Corporate Income Tax Returns of firms with employment data from LEAP.
It found that about 23% to 46% of the annual variation in sales and 13% to 37% of the annual variation in investment was accounted for by firm-specific shocks, in particular shocks to the largest firms in the industry. Firm-specific shocks, however, were not found to contribute to fluctuations in employment.
The research paper "Firm-specific Shocks and Aggregate Fluctuations in the Canadian Manufacturing Sector, 2000 to 2012," part of the Analytical Studies Branch Research Paper Series (11F0019M), is now available from the Browse by key resource module of our website, under Publications.
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