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On heterogeneity

Take for example a recent finding by Bank of England agents that "a majority of companies spoken with did not expect a near-term impact from the result [of the EU referendum] on their investment or staff hiring plans". Does this mean that the referendum result won't hurt the economy?

Not at all. Economic downturns are about what happens at a minority of companies. They occur not because all companies cut spending but because a minority do so. In their classic study of the 1989-91 recession Paul Geroski and Paul Gregg found that "recessionary pressures are concentrated on a relatively small number of firms." In that recession, 10 per cent of companies accounted for 85 per cent of the fall in employment.

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