TY  - JOUR
AU  - Veldkamp,Laura
AU  - Wolfers,Justin
TI  - Aggregate Shocks or Aggregate Information?  Costly Information and Business Cycle Comovement
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12557
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12557
L1  - http://www.nber.org/papers/w12557.pdf
N1  - Author contact info:
Laura Veldkamp
Stern School of Business
New York University
44 W Fourth Street,Suite 7-77
New York, NY 10012
Tel: 212/998-0527
Fax: 212/995-4218
E-Mail: lveldkam@stern.nyu.edu

Justin Wolfers
Business and Public Policy Department
Wharton School, University of Pennsylvania
3620 Locust Walk
Room 1456 Steinberg-Deitrich Hall
Philadelphia, PA 19104-6372
Tel: (215) 898-3013
Fax: (215) 898-7635
E-Mail: jwolfers@wharton.upenn.edu
AB  - Synchronized expansions and contractions across sectors define business cycles.  Yet synchronization is puzzling because productivity across sectors exhibits weak correlation.  While previous work examined production complementarity, our analysis  explores complementarity in information acquisition.  Because information about future productivity has a high fixed cost of production and a low marginal cost of replication, sectors can share the cost to forecast their sector-specific productivity.  Sectors with common, aggregate information make highly correlated productions choices.  By filtering out sector-specific shocks and transmitting aggregate ones, information markets amplify business-cycle comovement.
ER  -