Event Details

Economics Seminar

Abstract: "Many firms operate with backlogs of unfilled orders, creating time to fill: a lag between new order arrival and sales. Using novel administrative microdata for manufacturing in Germany, we show that backlogs are widespread and imply a time to fill of half a year on average. This lag renders sales prices predetermined by earlier prices of new orders, which invalidates a class of conventional strategies for identifying firm demand. We construct theoretically coherent new order prices, and use them to identify firm demand and supply shocks. We show, both empirically and theoretically, that backlog acts as an adjustment margin to shocks: it rises after expansionary demand shocks, falls after expansionary supply shocks, and shapes the persistence of firm responses"