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What is behind aggregate productivity growth in Ireland? A granular approach

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  • Papa, Javier

Abstract

This paper is aimed to empirically test for Ireland the “granular hypothesis” (Gabaix 2011), which posits that firm-level productivity shocks can explain a sizable portion of aggregate productivity fluctuations. The Irish case is particularly relevant as Ireland has been experiencing increasing economic concentration in recent years, to the point that micro shocks to a few selected firms in 2015 led to significant level shifts in aggregate variables like GDP (+34 per cent) and, particularly, labour productivity (+23 per cent) and total factor productivity (-12 per cent). Combining macro data from the CSO and the OECD with micro data from the Annual Business Survey of Economic Impact (ABSEI), the granular hypothesis is tested in Ireland for the period 2000-2016. Research findings confirm that productivity shocks to the 5 largest firms (in terms of value added) in Ireland account for a large fraction (about onethird) of aggregate productivity growth. These empirical results shed light on the origins of Irish productivity fluctuations, the consequences of economic concentration on resilience and the importance of diversification policies aimed at broadening Ireland’s enterprise base of productive firms.

Suggested Citation

  • Papa, Javier, 2019. "What is behind aggregate productivity growth in Ireland? A granular approach," MPRA Paper 116676, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:116676
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    File URL: https://mpra.ub.uni-muenchen.de/116676/1/MPRA_paper_116676.pdf
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    References listed on IDEAS

    as
    1. Giovanni Dosi & Mauro Napoletano & Andrea Roventini & Tania Treibich, 2019. "Debunking the granular origins of aggregate fluctuations: from real business cycles back to Keynes," Journal of Evolutionary Economics, Springer, vol. 29(1), pages 67-90, March.
    2. Javier Papa & Luke Rehill & Brendan O'Connor, 2021. "Patterns of Firm-Level Productivity in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 52(3), pages 241-268.
    3. repec:hal:spmain:info:hdl:2441/21q7rlmakq8ca9c6o2imhini9d is not listed on IDEAS
    4. Papa, Javier, 2018. "NCC Productivity Statement 2018," MPRA Paper 116680, University Library of Munich, Germany.
    5. Xavier Gabaix, 2011. "The Granular Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(3), pages 733-772, May.
    6. Carol Corrado & Jonathan Haskel & Cecilia Jona-Lasinio & Massimiliano Iommi, 2012. "Intangible Capital and Growth in Advanced Economies: Measurement Methods and Comparative Results," Economics Program Working Papers 12-03, The Conference Board, Economics Program.
    7. Haskel, Jonathan & Iommi, Massimiliano, 2012. "Intangible Capital and Growth in Advanced Economies: Measurement and Comparative Results," CEPR Discussion Papers 9061, C.E.P.R. Discussion Papers.
    8. Daron Acemoglu & Vasco M. Carvalho & Asuman Ozdaglar & Alireza Tahbaz‐Salehi, 2012. "The Network Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 80(5), pages 1977-2016, September.
    9. Mattia Di Ubaldo & Martina Lawless & Iulia Siedschlag, 2018. "Productivity spillovers from multinational activity to local firms in Ireland," OECD Productivity Working Papers 16, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Jozef Konings & Galiya Sagyndykova & Venkat Subramanian & Astrid Volckaert, 2023. "The granular nature of emerging market economies: The case of Kazakhstan," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(2), pages 429-464, April.
    2. Chris Haun & Tim Sargent, 2023. "Decomposing Canada’s Post-2000 Productivity Performance and Pandemic Era Productivity Slowdown," International Productivity Monitor, Centre for the Study of Living Standards, vol. 45, pages 5-27, Fall.

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    More about this item

    Keywords

    Productivity; Granularity; Aggregate Fluctuations; Micro-Macro Shocks; Ireland;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • 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
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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