No. 616 - Firm characteristics and potential output: a growth accounting approach

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by Davide Fantino, Sara Formai and Alessandro MistrettaApril 2021

This paper proposes a measure of potential output that exploits the wealth of information offered by a firm-level data set, while using a methodology similar to those normally applied to aggregate macroeconomic series. The estimates, covering the period 2000-2018, make it possible to analyse the role of production factors in supporting potential growth and its heterogeneity across geographic areas, sectors and groups of firms with different characteristics.

Potential output growth was mainly supported by capital and labour, except during the double-dip recession, when the positive contribution of smaller firms also waned. Since 2015, the largest firms, especially those in manufacturing, have driven the recovery, which was more pronounced in the North East. The performance of total productivity is mainly linked to the growth within sectors rather than to changes in sectoral composition.

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