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Firm characteristics and potential output: a growth accounting approach

Davide Fantino (), Sara Formai () and Alessandro Mistretta
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Sara Formai: Bank of Italy

No 616, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We apply a growth accounting approach to estimate the contribution to potential output growth in Italy by firms with different characteristics. We do so by exploiting time series obtained by aggregating individual firm data. Results show that during the double-dip recession smaller firms provided the strongest negative contribution to potential output growth, while the recovery was driven by big ones. Young firms always give a positive contribution. Growth within sectors is the main driver of the dynamic of both aggregate trend total factor productivity and the capital labor ratio. Looking at sectoral composition effects, between 2014 and 2018 sectors with lower capital deepening have increased their share in the economy, holding back the aggregate figures.

Keywords: potential output; heterogeneity (search for similar items in EconPapers)
JEL-codes: D24 E23 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-eec, nep-eff and nep-mac
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