The UK Productivity Puzzle: Does Firm Cohort matter for their Performance following the Financial Crisis?

Mustapha Douch (), Terence Edwards and Sushanta Mallick ()
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Mustapha Douch: Bank of Lithuania, The University of Edinburgh

No 101, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: This paper provides empirical evidence on how the aftermath of the 2008 crisis affected firm productivity in the UK, taking account of the cohort effect of firms established after 2008. We test this using firmspecific and time-varying credit scores to capture firms’ ability to access credit. To overcome the identification problem, a matched sample based on firm’s credit score, firm age, size and ownership status is used by undertaking the propensity score matching approach. While we find evidence that smaller firm size and changes in credit conditions affect productivity, about half of the difference in productivity remains unexplained. We extend the matching analysis to examine sectors and cohorts, and find that, during 2011-2016, the low productivity is driven primarily by newer firms operating in the services sector, rather than in manufacturing. Within services, the underlying productivity puzzle is driven by a cessation of growth in high-productivity financial services, while abundant labour supply has led to a ‘levelling down’ of performance of newer firms in the rest of services, in line with relatively lowproductivity manufacturing.

Keywords: : Total Factor Productivity; Cohort; Crisis; Firm Survival; Credit Score. (search for similar items in EconPapers)
JEL-codes: D24 E00 E30 G21 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022-01-31
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-eff, nep-eur, nep-fdg, nep-his, nep-mac and nep-sbm
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