, and show that it has significant explanatory power for the evolution of macroeconomic volatility. We define "fundamental …" volatility as the volatility that would arise from an economy made entirely of idiosyncratic microeconomic shocks, occurring … different sectors vary over time (in a way we directly measure), while the volatility of those sectors remains constant. We find …

and it hence lowers the volatility of output. Technological complexity evolves endogenously in response to profit …

. The new insight is that an expansion in the number of varieties also lowers the volatility of output. This is because …