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The Best versus the Rest: Divergence across Firms During the Global Productivity Slowdown

Dan Andrews, Chiara Criscuolo () and Peter Gal

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: We document that labor productivity of the globally most productive firms - the "frontier" - has diverged from all other firms - the "rest" - throughout the 2000s. This divergence remains after controlling for capital intensity and markups, and is strongest in ICT services, indicative of "winnertakes-all" dynamics. We also find weakening catch-up and market selection below the frontier, which can explain why this divergence at the firm level is linked to weaker aggregate productivity. The divergence is found to be stronger in industries where product market regulations are less competition friendly, highlighting the need for regulatory policy to improve the contestability of markets.

Keywords: firm dynamics; regulation; knowledge diffusion; technological change; productivity (search for similar items in EconPapers)
JEL-codes: O30 O40 M13 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-eff, nep-ent and nep-ino
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