Growing by Learning: Firm-Level Evidence on the Size-Productivity Nexus
37 Pages Posted: 1 Jul 2016
Date Written: July 1, 2016
It is a well-known empirical regularity that small firms are less productive than large firms. However, does size cause productivity or vice versa? Using matching methods, I find that productivity shocks are followed by significant increases in size defined by employment. In contrast, size shocks are not followed by productivity gains at the firm level. This finding casts doubt on the conventional wisdom that aggregate productivity in Spain is driven by a firm size distribution biased towards small firms in comparison with other developed countries. According to my findings, low firm-level productivity might play a crucial role in shaping the Spanish firm size distribution.
Keywords: firm-level data, productivity, size distribution
JEL Classification: L11, L25, D24
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