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Catching up in total factor productivity through the business cycle: Evidence from Spanish manufacturing firms

Listed author(s):
  • Álvaro Escribano

    ()

    (Universidad Carlos III de Madrid)

  • Rodolfo Stucchi

    ()

    (Inter-American Development Bank)

After facing more than a decade of price stability and economic growth, Spain is experiencing now one of the most significant slowdowns in economic activity across EU economies. There is a general consensus the severity of this slowdown is due to the low level and low rates of growth experienced by total factor productivity (TFP) during more than a decade. Using firm-level data over the period 1991-2005 we study the effect of recessions on the productivity growth of firms with different level of productivity (i.e., technological leaders and technological followers) and we find that firms tend to converge in recessions. In expansions, on the other hand, we find higher persistence in terms of productivity and no convergence. These findings are consistent with the predictions of technological diffusion models and the fact that firm’s innovation is procyclical. We also find that human capital and innovation are key factors that could enhance the productivity of Spanish manufacturing firms.

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Paper provided by Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales in its series Working Papers with number 2011-10.

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Date of creation: 28 Jun 2011
Handle: RePEc:imd:wpaper:wp2011-10
Note: This paper is included in the IMDEA Social Sciences Working Paper Series through the Bank of Spain Excellence Programme
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