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Growing by learning: firm-level evidence on the size-productivity nexus

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  • Enrique Moral-Benito

    (Banco de España)

Abstract

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.

Suggested Citation

  • Enrique Moral-Benito, 2016. "Growing by learning: firm-level evidence on the size-productivity nexus," Working Papers 1613, Banco de España.
  • Handle: RePEc:bde:wpaper:1613
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    3. Luis Medrano-Adán & Vicente Salas-Fumás, 2022. "The added value of management skill in the explanation of the distribution of firm size," Small Business Economics, Springer, vol. 58(3), pages 1379-1405, March.
    4. Pål Børing, 2019. "The relationship between firm productivity, firm size and CSR objectives for innovations," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 9(3), pages 269-297, September.
    5. Rafael Myro, 2019. "A policy for a new industrial revolution," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(3), pages 403-414, September.
    6. Alexander Kopka & Dirk Fornahl, 2024. "Artificial intelligence and firm growth — catch-up processes of SMEs through integrating AI into their knowledge bases," Small Business Economics, Springer, vol. 62(1), pages 63-85, January.
    7. Diego G. Ferber Pineyrua & Alfonso Redondo & José A. Pascual & Ángel M. Gento, 2021. "Knowledge Management and Sustainable Balanced Scorecard: Practical Application to a Service SME," Sustainability, MDPI, vol. 13(13), pages 1-24, June.
    8. Daan Freeman & Leon Bettendorf & Harro van Heuvelen & Gerdien Meijerink, 2021. "The contribution of business dynamics to productivity growth in the Netherlands," CPB Discussion Paper 427, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Peter Bauer & Igor Fedotenkov & Aurelien Genty & Issam Hallak & Peter Harasztosi & David Martinez Turegano & David Nguyen & Nadir Preziosi & Ana Rincon-Aznar & Miguel Sanchez Martinez, 2020. "Productivity in Europe: Trends and drivers in a service-based economy," JRC Research Reports JRC119785, Joint Research Centre (Seville site).
    10. Desiderio Romero-Jordán & Ismael Sanz-Labrador & José Félix Sanz-Sanz, 2020. "Is the corporation tax a barrier to productivity growth?," Small Business Economics, Springer, vol. 55(1), pages 23-38, June.
    11. Andrés, Javier & Burriel, Pablo, 2018. "Inflation and optimal monetary policy in a model with firm heterogeneity and Bertrand competition," European Economic Review, Elsevier, vol. 103(C), pages 18-38.
    12. Luis Medrano-Adán & Vicente Salas-Fumás & J. Javier Sanchez-Asin, 2019. "Firm size and productivity from occupational choices," Small Business Economics, Springer, vol. 53(1), pages 243-267, June.
    13. Kritikos, Alexander S. & Schiersch, Alexander & Stiel, Caroline, 2021. "The Productivity Puzzle in Business Services," IZA Discussion Papers 14610, Institute of Labor Economics (IZA).
    14. Vanesa Llorens & Alfredo Martín-Oliver & Vicente Salas-Fumas, 2020. "Productivity, competition and bank restructuring process," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 11(3), pages 313-340, September.

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    More about this item

    Keywords

    firm-level data; productivity; size distribution;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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