I illustrate that the welfare improvement property of the Melitz model is due to the shape of the aggregate labor demand curve, which slopes upwards. By slightly changing some assumptions in the model, this curve may have a negative slope. In this case, increases in aggregate productivity result in a reduction in welfare. For example,
Several empirical studies suggest that the systematic behavior of lending standards, with laxer (tighter) standards applied during expansions (recessions) are responsible for reverting trends in aggregate productivity. We build a dynamic screening model with informational asymmetries in credit markets that rationalizes the observed dependence of lending standards on economic fundamentals and generates reversion of output