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Productivity dynamics in the Great Stagnation: evidence from British businesses

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  • Riley, Rebecca
  • Rosazza Bondibene, Chiara
  • Young, Garry

Abstract

We investigate labor productivity dynamics amongst British businesses in the wake of the credit crisis of 2007/8. The external restructuring of firms (i.e. changes in market share, firm entry and exit) contributed to a fall in productivity growth relative to trend amongst small businesses in bank dependent industries, consistent with the idea that an adverse credit supply shock caused inefficiencies in resource allocation across firms. But, the major part of the decline in UK productivity growth following the credit crisis was accounted for by a widespread productivity shock within firms, pointing to the importance of other factors in explaining the Great Stagnation.

Suggested Citation

  • Riley, Rebecca & Rosazza Bondibene, Chiara & Young, Garry, 2014. "Productivity dynamics in the Great Stagnation: evidence from British businesses," LSE Research Online Documents on Economics 58108, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:58108
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    File URL: http://eprints.lse.ac.uk/58108/
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    Cited by:

    1. Michel Dumont & Glenn Rayp & Marijn Verschelde & Bruno Merlevede, 2016. "The contribution of start-ups and young firms to industry-level efficiency growth," Applied Economics, Taylor & Francis Journals, vol. 48(59), pages 5786-5801, December.
    2. Lawrence Edwards & Nicholas Masiyandima, 2018. "Shaking out or shaking in: The impact of Zimbabwe’s economic crisis on the country’s manufacturing sector allocative efficiency," Working Papers 749, Economic Research Southern Africa.
    3. Saara Tamminen, 2017. "Regional effects or none? Firms' profitability during the Great Recession in Finland," Papers in Regional Science, Wiley Blackwell, vol. 96(1), pages 33-59, March.
    4. Bart van Ark, 2014. "Total factor productivity : Lessons from the past and directions for the future," Working Paper Research 271, National Bank of Belgium.
    5. Rebecca Riley & Chiara Rosazza-Bondibene, 2015. "The UK Productivity Puzzle 2008-2013: Evidence From British Businesses," National Institute of Economic and Social Research (NIESR) Discussion Papers 450, National Institute of Economic and Social Research.
    6. Riley, Rebecca & Rosazza-Bondibene, Chiara & Young, Garry, 2015. "The UK productivity puzzle 2008-13: evidence from British businesses," Bank of England working papers 531, Bank of England.
    7. A. Arrighetti & R. Brancati & A. Lasagni & A. Maresca, 2015. "Firms’ heterogeneity and performance in manufacturing during the great recession," Economics Department Working Papers 2015-EP03, Department of Economics, Parma University (Italy).

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    More about this item

    Keywords

    productivity growth; reallocation; Great Recession and Stagnation; credit shock;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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