Technological Synergies, Heterogeneous Firms, and Uncertainty Shocks

This paper examines the role of technological synergies among heterogeneous firms in business cycle fluctuations. We first document six empirical facts using microdata, revealing strong synergies, positive assortative matching, and their cyclical variations. Next, we embed these synergies into a quantitative business cycle model calibrated to firm-level data, showing that frictions in forming and dissolving trading relationships lead to imperfect sorting with significant macro effects. Specifically, we demonstrate that, in the presence of technological synergies, uncertainty shocks reduce aggregate output even without nonconvex adjustment costs, nominal rigidities, or financial frictions.