Business Dynamics and Productivity Growth in the Netherlands

34 Pages Posted: 25 Apr 2024

See all articles by Daan Freeman

Daan Freeman

CPB Netherlands Bureau of Economic Policy Analysis

Leon Bettendorf

CPB Netherlands Bureau of Economic Policy Analysis

Gerrit Hugo van Heuvelen

Erasmus University Rotterdam (EUR); CPB Netherlands Bureau of Economic Policy Analysis

Gerdien W. Meijerink

Netherlands Bureau for Economic Policy Analysis (CPB); CPB Netherlands Bureau of Economic Policy Analysis

Date Written: 2024

Abstract

This study examines the decline in firm dynamism within the Netherlands, potentially linked to the deceleration of productivity growth. We utilise a rich microdata set covering the period 2006-2016, encompassing nearly all Dutch corporations. This dataset facilitates an evaluation of start-ups’ and exiting firms’ contributions to Total Factor Productivity (TFP) growth across various industries, employing the Melitz and Polanec (2015) decomposition approach. Our findings reveal that in service sectors, the creative destruction hypothesis is substantiated, as start-ups and exiting firms positively impact overall TFP growth. In contrast, TFP growth in manufacturing is primarily driven by incumbent firms. Entry and exit dynamics in this context exert minimal or even negative influence on TFP growth. Although entrants in manufacturing initially display lower productivity than incumbents, their productivity growth outpaces that of incumbents. In services, entrants commence operations with higher initial productivity, a trait that gradually diminishes over time. Generally, entrants with relatively low productivity are predisposed to exit within five years, aligning with the ’up-or-out’ pattern.

Keywords: productivity slowdown, firm dynamics, TFP, Netherlands

Suggested Citation

Freeman, Daan and Bettendorf, Leon and van Heuvelen, Gerrit Hugo and Meijerink, Gerdien W., Business Dynamics and Productivity Growth in the Netherlands (2024). CESifo Working Paper No. 11071, Available at SSRN: https://ssrn.com/abstract=4803858 or http://dx.doi.org/10.2139/ssrn.4803858

Daan Freeman (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Leon Bettendorf

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Gerrit Hugo Van Heuvelen

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Gerdien W. Meijerink

Netherlands Bureau for Economic Policy Analysis (CPB) ( email )

The Hague
Netherlands

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

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