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The Importance of Reallocation for Productivity Growth: Evidence from European and US Banking

J. Bos, Santen P.C. van and Schilp P.
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Schilp P.: GSBE

No 56, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)

Abstract: This paper quantifies the effect of reallocation dynamics on aggregate productivity developments in the banking sectors of Europe and the United States. We document an increase in productivity over the period 1995-2009, on the order of 11 in the US and 19 in Europe. At an annual frequency, under-performing banks capture market share, while more productive banks lose market share, in particular in the US. The pattern of reallocation is markedly different between the geographical regions European productivity has grown by reallocating inputs through the first half of the sample, at the same time when reallocation diminished growth in the US. Within-firm growth has been rising steadily in both areas, largely due to technical change. The long- run positive effects of creative destruction are especially apparent in the US, where reallocation is an important driver of increases in aggregate productivity.

Keywords: Single Equation Models; Single Variables: Truncated and Censored Models; Switching Regression Models; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity; Technological Change; Research and Development; Intellectual Property Rights: General; Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence (search for similar items in EconPapers)
JEL-codes: O47 O30 D24 C24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff
Date: 2013
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Working Paper: The Importance of Reallocation for Productivity Growth: Evidence from European and US Banking (2015) Downloads
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