Firm Characteristics and Potential Output: A Growth Accounting Approach

39 Pages Posted: 24 May 2021

Date Written: April 22, 2021

Abstract

We apply a growth accounting approach to estimate the contribution to potential output growth in Italy by firms with different characteristics. We do so by exploiting time series obtained by aggregating individual firm data. Results show that during the double-dip recession smaller firms provided the strongest negative contribution to potential output growth, while the recovery was driven by big ones. Young firms always give a positive contribution. Growth within sectors is the main driver of the dynamic of both aggregate trend total factor productivity and the capital labor ratio. Looking at sectoral composition effects, between 2014 and 2018 sectors with lower capital deepening have increased their share in the economy, holding back the aggregate figures.

Keywords: potential output, heterogeneity

JEL Classification: D24, E23

Suggested Citation

Fantino, Davide and Formai, Sara and Mistretta, Alessandro, Firm Characteristics and Potential Output: A Growth Accounting Approach (April 22, 2021). Bank of Italy Occasional Paper No. 616, Available at SSRN: https://ssrn.com/abstract=3852285 or http://dx.doi.org/10.2139/ssrn.3852285

Davide Fantino

Bank of Italy ( email )

Via Nazionale 91
Roma, 00184
Italy

Sara Formai (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Alessandro Mistretta

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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