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The financial side of the productivity slowdown

Silvia Merler, (2018), “The financial side of the productivity slowdown”, Bruegel, 22 January

Specifically: (i) firms that entered the crisis with weaker balance sheets experienced decline in total-factor productivity growth, relative to their less vulnerable counterparts after the crisis; (ii) this decline was larger for firms located in countries where credit conditions tightened more; (iii) financially fragile firms cut back on intangible capital investment compared to more resilient firms, which is one plausible way through which financial frictions undermined productivity. All of these effects are highly persistent and quantitatively large – possibly accounting on average for about a third of the post-crisis slowdown in within-firm total-factor productivity growth.

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