OECD Economic Outlook 69 - Biblioteca Hegoa

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VII. PRODUCTIVITY AND FIRM DYNAMICS: EVIDENCE FROM MICRODATA Introduction and summary Chapters in the two previous issues of the OECD Economic Outlook (Nos. 67 and 68) discussed growth patterns in the OECD countries at the macroeconomic and sectoral levels. But growth of output and productivity takes place in individual firms, whose behaviour and decisions are influenced not only by market forces but also by policies and institutions. Understanding the underlying forces generating differences in performance at the firm level thus helps to formulate growth-oriented policies. There is by now a sizeable body of evidence on firm performance, but international comparisons have been difficult to make. This chapter reports evidence on productivity growth and firm dynamics 1 for ten countries (United States, Germany, France, Italy, United Kingdom, Canada, Denmark, Finland, Netherlands and Portugal) on the basis of a common analytical framework and, to the extent possible, harmonised data. 2 The main conclusions of this analysis are the following: – A large fraction of aggregate labour productivity growth is driven by what happens in each individual firm, while shifts in market shares from incumbents in decline to those who are growing seem to play only a modest role. – Labour productivity growth is also boosted by the exit of low productivity units, especially in mature industries. In other industries – in particular those experiencing rapid technological changes (e.g. ICT-related industries) – the entry of new units is important in fostering overall productivity growth. – Within-firm growth makes a relatively smaller contribution to multifactor productivity growth – a proxy for overall efficiency in the production process – than it does to labour productivity. This suggests that incumbents often raise labour productivity by increasing capital intensity and/or shedding labour. By contrast, new firms provide a relatively larger contribution to multifactor productivity, possibly because they enter the market with a more “efficient” mix of capital and labour and likely new technologies. 1. Firm dynamics includes firms starting up (entry) and firms going out of business, for whatever reason (exit). 2. The chapter draws from an ongoing project on firm-level data which is itself part of the OECD project on growth. The analysis has been conducted in close co-operation with country experts, who have contributed to the definition of a common analytical framework and the standardisation of key concepts. The institutions and research centres involved in the study are the following: Canada: Statistics Canada; Denmark: Ministry of Finance and Aarhus School of Business; Finland: Statistics Finland and Research Institute of the Finnish Economy; France: INSEE; Germany: consultants; Italy: Bank of Italy; Netherlands: Free University Amsterdam; Portugal: Banco de Portugal; United Kingdom: Queen Mary and Westfield College; United States: Center for Economic Studies, US Census Bureau. The full set of results from this project will be published in due course in the Economics Department Working Papers series. This chapter looks at the role of resource reallocation and firm dynamics in aggregate productivity growth Aggregate productivity growth largely depends on the performance of incumbents… … but also on the entry and exit of firms… © OECD 2001
210 - OECD Economic Outlook 69 … which, in turn, involve many, generally small, firms Aggregate patterns hide significant differences in performance of individual firms… – A large number of firms enter and exit most markets every year. The early years are the most difficult for entrants: 20 to 40 per cent of entering firms do not survive the first two years. Young firms that fail are often very small, while those surviving tend to be larger and experience further increases in the initial years. The chapter is divided into four separate sections. The first section discusses the contribution of firm-level data to the analysis of productivity growth in OECD countries. The second section presents evidence on the importance for aggregate productivity dynamics of developments within individual firms as well as entry and exit of firms in markets. A decomposition of productivity growth is performed for manufacturing and for some service sectors and refers to estimates of both labour and multifactor productivity. The third section characterises entry and exit of firms across industries and countries and sheds some light on post-entry growth. Lastly, a short final section offers some preliminary policy considerations. The role of firm-level data for the analysis of productivity dynamics … and this could affect the orientation of growthenhancing policies Analysis of micro data points to a marked heterogeneity in the distribution of output, employment, investment and productivity growth across firms and establishments. 3 Even in expanding industries, many firms experience substantial decline, and in contracting industries it is not uncommon to find rapidly expanding units. Likewise, business-cycle upturns and downturns do not necessarily involve a synchronised movement of all, or even most, firms or establishments. There are a number of possible explanations for this. Heterogeneity may reflect certain conditions in the product market, e.g. product differentiation, which can, at least partially, be related to regulatory and institutional conditions. At the same time, uncertainty about market conditions and profitability may lead firms to make different choices concerning technologies, goods and production facilities. 4 This process of “experimentation”, in turn, is associated with high entry rates but also high failure rates, especially amongst relatively young firms, and more generally widens differences in outcomes. Finally, it has been argued that new technologies are often embodied in new capital, which, however, requires a retooling or remodelling process in existing plants adopting these technologies, as well as changing work practices in some cases. Insofar as new firms do not have to go through this process, they may better harness new technologies and growth will then tend to be associated with new entrants who displace obsolescent establishments, and this process of “creative destruction” contributes to the observed heterogeneity in firms’ performance. Policy orientations to enhance growth may depend crucially on how growth is generated at the level of individual firms. Importantly, the expansion or contraction of existing units or the creation and failure of firms impose costs on all those involved (e.g. entrepreneurs, workers, financing institutions). The magnitude of these costs is influenced by institutional and regulatory settings in the product and labour markets, such as administrative regulations on start-ups, bankruptcy laws and regulations affecting the 3. For a survey of recent empirical studies see Caves (1998) and Bartelsman and Doms (2000). 4. Individual firms experiment to some extent with different production processes and technologies as they learn more about their markets, but a more important process of “experimentation” (in the sense of a natural experiment) occurs because different firms try different approaches to production and technologies. See, amongst others, Aghion and Howitt (1992); Caballero and Hammour (1994, 1996); Erickson and Pakes (1995) and Jovanovic (1982).
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OECD Economic Outlook ECONOMICS «
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OECD ECONOMIC OUTLOOK 69 JUNE 2001
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FOREWORD This edition of the OECD E
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TABLE OF CONTENTS Editorial .......
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Table of contents - vii I.5. Profit
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EDITORIAL Economic growth in the OE
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ingness to liquidate insolvent bank
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2 - OECD Economic Outlook 69 Weakne
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4 - OECD Economic Outlook 69 Easier
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6 - OECD Economic Outlook 69 Box I.
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8 - OECD Economic Outlook 69 ... wh
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10 - OECD Economic Outlook 69 Curre
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12 - OECD Economic Outlook 69 Decem
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14 - OECD Economic Outlook 69 The s
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16 - OECD Economic Outlook 69 Per c
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20 - OECD Economic Outlook 69 … b
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24 - OECD Economic Outlook 69 Falli
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26 - OECD Economic Outlook 69 Unite
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28 - OECD Economic Outlook 69 Monet
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30 - OECD Economic Outlook 69 Box I
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34 - OECD Economic Outlook 69 The f
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36 - OECD Economic Outlook 69 Monet
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40 - OECD Economic Outlook 69 ... w
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42 - OECD Economic Outlook 69 … w
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II. DEVELOPMENTS IN INDIVIDUAL OECD
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1998 1999 2000 2001 2002 Household
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the long-run tax cut will be introd
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Japan: Employment, income and infla
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Japan: External indicators 1998 199
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Germany Developments in individual
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1998 1999 2000 2001 2002 Household
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France Developments in individual O
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1998 1999 2000 2001 2002 Household
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Italy Developments in individual OE
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1998 1999 2000 2001 2002 Household
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United Kingdom Developments in indi
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1998 1999 2000 2001 2002 Household
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Canada Developments in individual O
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1998 1999 2000 2001 2002 Household
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86 Australia Developments in indivi
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cially after the RBA’s recent int
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Austria: Demand, output and prices
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Belgium Developments in individual
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contribution of net exports to grow
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Czech Republic: Demand, output and
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Denmark Developments in individual
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hold incomes recover. Although expo
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Finland: Demand, output and prices
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Greece: Demand, output and prices 1
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Hungary: Demand, output and prices
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Iceland: Demand, output and prices
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Ireland: Demand, output and prices
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Korea Developments in individual OE
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Luxembourg Developments in individu
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Mexico Developments in individual O
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Netherlands Developments in individ
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age this year, mainly reflecting ta
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New Zealand: Demand, output and pri
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Norway Developments in individual O
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There are substantial risks to the
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Poland: Demand, output and prices 1
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Portugal Developments in individual
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especially as the deficit has been
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Slovak Republic: Demand, output and
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Spain: Demand, output and prices 19
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Sweden Developments in individual O
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Despite recent indicators suggestin
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Switzerland: Demand, output and pri
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Turkey: Demand, output and prices 1
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III. DEVELOPMENTS IN SELECTED NON-M
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Substantial progress has been made
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with a 7 per cent increase in urban
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the current account should remain q
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IV. FISCAL IMPLICATIONS OF AGEING:
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Third, in any case, projections ove
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The baseline projections for public
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Old-age pension spending Levels of
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Old-age pension spending trends to
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Page 237 and 238: Annex Tables Statistical Annex - 22
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© OECD 2001 Annex Table 33. Genera
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© OECD 2001 Annex Table 35. Genera
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© OECD 2001 1983 1984 1985 1986 An
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© OECD 2001 Annex Table 39. Effect
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© OECD 2001 Annex Table 41. Import
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© OECD 2001 Annex Table 43. Import
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© OECD 2001 1983 1984 1985 1986 An
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© OECD 2001 Annex Table 47. Shares
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© OECD 2001 Annex Table 49. Non-fa
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© OECD 2001 Annex Table 51. Curren
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© OECD 2001 Annex Table 53. Struct
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Annex Table 54. (cont'd) Semiannual
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Annex Table 56. Contributions to ch
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Annex Table 57. Household wealth an
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Annex Table 61. Monetary and credit
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Annex Table 63. Geographical struct
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OTHER OECD STATISTICAL SERIES ON DI
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For customers in Austria, Germany a
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