Recessions Across Industries: A Survey

This paper surveys existing knowledge about how and why industries differ with respect to the impact of recessions and credit crunches. While this question is of obvious relevance in today’s business environment the relevant knowledge is scattered across several literatures, including macroeconomics, finance, industrial organization and strategic management. We summarize and integrate this knowledge. Our approach is first to examine what determines the cyclicality of demand in an industry, or more precisely, the sensitivity of industry demand to negative shocks in aggregate demand. We then move on to examine how the supply side responds to these shocks, in particular whether the response is primarily in the form of reduced output or reduced margins. Finally, we examine implications for industry productivity, both in the short and the longer run.