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International trade, non-trading firms and their impact on labour productivity

Author

Listed:
  • Stephen Millard

    (Bank of England)

  • Anamaria Nicolae

    (Durham University Business School)

  • Michael Nower

    (Durham University Business School)

Abstract

In this paper we examine the impact of non-trading firms on labour productivity and its persistence in response to macroeconomic shocks, through their entry and exit into the domestic market, in a model with monopolistic competition and heterogeneous firms. We quantify the effects of various macroeconomic shocks on labour productivity and we demonstrate that non-trading domestic firms’ entry and exit into the domestic market explains the persistence of labour productivity in response to transitory shocks. We also show that the model successfully replicates the sluggish recovery of labour productivity in the United Kingdom since the Great Recession.

Suggested Citation

  • Stephen Millard & Anamaria Nicolae & Michael Nower, 2019. "International trade, non-trading firms and their impact on labour productivity," Bank of England Staff Working Paper series 787, Bank of England.
    • Handle: RePEc:boe:boeewp:0787
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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