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Reallocation and productivity during the Great Recession: evidence from French manufacturing firms
[Turbulence, firm decentralization, and growth in bad times]

Author

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  • Giacomo Domini
  • Daniele Moschella

Abstract

According to the ‘cleansing hypothesis’, recessions are periods in which productivity-enhancing reallocation intensifies, shifting resources away from less efficient to more efficient firms at a faster pace. Does the Great Recession of 2008–2010 fit this view? We address this question, studying the case of the French manufacturing sector. Based on a panel of firms, built by matching several data sources, we analyze the dynamics of the relation between productivity and reallocation over the period 2002–2013. Our results show that, during the Great Recession, more productive firms decreased their advantage with respect to less productive firms, in terms of both employment growth and probability to survive, in disagreement with the cleansing hypothesis. This attenuation of productivity-enhancing reallocation was significantly driven by the trade collapse and credit crunch that were associated with the crisis, while it does not emerge to depend on labor-market regulations and anti-crisis policies.

Suggested Citation

  • Giacomo Domini & Daniele Moschella, 2022. "Reallocation and productivity during the Great Recession: evidence from French manufacturing firms [Turbulence, firm decentralization, and growth in bad times]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 31(3), pages 783-810.
    • Handle: RePEc:oup:indcch:v:31:y:2022:i:3:p:783-810.
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    File URL: http://hdl.handle.net/10.1093/icc/dtab075
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    Cited by:

    1. Silviano Esteve-Pérez & Fabio Pieri & Diego Rodriguez, 2024. "Coping with high decline: firms’ resilience to adversity," Small Business Economics, Springer, vol. 63(1), pages 193-219, June.
    2. Meriküll, Jaanika & Paulus, Alari, 2024. "Were jobs saved at the cost of productivity in the COVID-19 crisis?," European Economic Review, Elsevier, vol. 161(C).
    3. Goswami, Diti, 2024. "Aggregate productivity, economic fluctuations, and export orientation: Evidence from India," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 581-593.
    4. Lalinsky, Tibor & Meriküll, Jaanika & Lopez-Garcia, Paloma, 2024. "Productivity-enhancing reallocation during the Covid-19 pandemic," Working Paper Series 2947, European Central Bank.
    5. Saini, Seema & Ahmad, Wasim & Uddin, Gazi Salah, 2024. "Do recessions induce Schumpeterian creative destruction? Micro Evidence from India," Emerging Markets Review, Elsevier, vol. 59(C).

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