Small and Vulnerable: Small Firm Productivity in the Great Productivity Slowdown

December 18, 2020

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Sophia Chen, and Dongyeol Lee. Small and Vulnerable: Small Firm Productivity in the Great Productivity Slowdown, (USA: International Monetary Fund, 2020) accessed October 6, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We provide broad-based evidence of a firm size premium of total factor productivity (TFP) growth in Europe after the Global Financial Crisis. The TFP growth of smaller firms was more adversely affected and diverged from their larger counterparts after the crisis. The impact was progressively larger for medium, small, and micro firms relative to large firms. It was also disproportionally larger for firms with limited credit market access. Moreover, smaller firms were less likely to have access to safer banks: those that were better capitalized banks and with a presence in the credit default swap market. Horseraces suggest that firm size may be a more important and robust vulnerability indicator than balance sheet characteristics. Our results imply that the tightening of credit market conditions during the crisis, coupled with limited credit market access especially among micro, small, and medium firms, may have contributed to the large and persistent drop in aggregate TFP.

Subject: Credit, Credit default swap, Financial crises, Financial statements, Total factor productivity

Keywords: Credit constraint, Credit market access, Creditor bank, Financial crisis, Firm size, Intangibles, Micro firm, Producvitity, Size premium, SMEs, TFP growth, Vulnerability indicator, WP

Publication Details

Pages:

51
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/294
Stock No:

WPIEA2020294
ISBN:

9781513564647
ISSN:

1018-5941

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