Productivity-Enhancing Reallocation during the Great Recession:Evidence from Lithuania

Linas Tarasonis and Jose Garcia-Louzao

No 86, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: This paper studies the impact of the Great Recession on the relationship between reallocation and productivity dynamics in Lithuania. Using detailed microlevel data, we first document the aggregate contribution of firm exit and employment reallocation to productivity growth. Next, we estimate firm-level regressions to confirm the findings and to perform a heterogeneity analysis. This analysis shows that productivity shielded firms from exit, and that this relationship became stronger during the Great Recession. Moreover, we demonstrate that more productive firms experienced on average lower employment losses, and that this effect was even stronger during the economic slump. Taken together, our results suggest that reallocation was productivityenhancing during the Great Recession. However, the analysis also indicates that reallocation intensity varied with sector's dependence on external financing or international trade as well as market concentration.

Keywords: firm dynamics; job reallocation; productivity; Great Recession (search for similar items in EconPapers)
JEL-codes: E24 E32 J23 L11 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2021-03-19
New Economics Papers: this item is included in nep-eff, nep-eur, nep-lma, nep-mac and nep-tra
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Journal Article: Productivity-enhancing reallocation during the Great Recession: evidence from Lithuania (2023)
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