Resource Misallocation in European Firms: The Role of Constraints, Firm Characteristics and Managerial Decisions

Gorodnichenko, Yuriy; Revoltella, Debora; Švejnar, Jan; Weiß, Christoph

doi:10.3386/w24444

Cited by 11 publications

(7 citation statements)

References 29 publications

(48 reference statements)

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“…A high MRPK dispersion across firms within a country would imply that productivity gains can be reaped by reallocating capital from firms with low MRPK to firms with high MRPK. Recent survey data, based on firm margins of adjustment across a broad range of countries, suggests that dispersion is high for Austria and lends confirmation to the capital channel (see Gorodnichenko et. al., 2018).…”

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confidence: 87%

Austria: Selected Issues

2021

IMF Staff Country Reports

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The COVID-19 pandemic adversely affected the Austrian economy. Evidence from previous crises suggests that economic scarring is common and driven by labor market hysteresis, impaired corporate balance sheets, and deteriorating productivity. As the recovery takes hold, policies aiming at preventing potential rise in long-term unemployment, as well as addressing skills and regional mismatches can foster job creation and promote efficient reallocation of labor. Targeted equity-like instruments and an effective insolvency framework can help rehabilitate corporate balance sheets while allowing nonviable to efficiently exit the market. B. Austria's Economic Scarring: Lessons from the Past 1Economic scarring is common after a large crisis. Sources of economic scarring from the current pandemic could include: labor hysteresis from structural transformation which accelerated during the crisis, a potential rise in long-term unemployment, and deterioration in corporate balance sheets among others. Nonetheless, the unprecedented support could help mitigate economic scarring. Going forward, policies should aim at securing the recovery and facilitating the efficient reallocation of labor and capital through active labor market policies and solvency support for viable firms in order to replenish corporate balance sheets. 5.Previous studies show that economic scarring from a large crisis is common, but the magnitudes differ across crises. Many countries experience economic scarring-a persistent output loss compared to the pre-crisis trend-after a large crisis, such as the Asian crisis, the Global Financial Crisis (GFC), health crises, and civil wars. 2 The magnitudes of the losses varied greatly, ranging from less than 5 percent (currency crises and previous health crises) to over 10 percent (civil wars). Countries experiencing systemic banking crises, including the GFC, are shown to have a cumulative output loss of about 6 percent below the pre-crisis trend. 6.Supply, demand, and policy factors can all play a role in explaining economic scarring. 3 Supply factors include employment losses that do not recover later (labor market hysteresis) and deterioration in physical and human capital accumulation. Demand-side channels include persistently suppressed consumption and investment as a result of weakened household and corporate balance sheets and higher precautionary savings from heightened uncertainty. Policy factors-including fiscal and monetary policy-have been found to either mitigate or aggravate economic scarring. 7.This section assesses potential economic scarring from the current pandemic for Austria. The COVID-19 pandemic has been an unparalleled shock to the economy where the path of recovery is very uncertain. Nonetheless, reviewing channels of scarring from previous crises could provide helpful information as to how the pandemic could affect the economy in the medium term. The analysis presents the current impacts of the pandemic on Austria's economy and highlights 1 By Nujin Suphaphiphat 2 Shi and Suphaphiphat (for...

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confidence: 87%

Austria: Selected Issues

2021

IMF Staff Country Reports

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“…Gerth and Otsu (2018) find that this had a big impact on efficiency in the UK through 2014 but it is not known if this effect persisted through 2018. Resource misallocation is generally substantial in Europe though less severe in the UK than most other countries (Gorodnichenko et al, 2018). 8 Reduced productivity growth in financial services no doubt partly reflected a lower ICT capital contribution so is not entirely additional to the ICT impact already discussed.…”

Section: Notesmentioning

confidence: 97%

Is the Uk Productivity Slowdown Unprecedented?

Crafts¹,

Mills²

2020

NIER

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We estimate trend UK labour productivity growth using a Hodrick-Prescott filter method. We use the results to compare downturns where the economy fell below its pre-existing trend. We find that the current productivity slowdown has resulted in productivity being 19.7 per cent below the pre-2008 trend path in 2018. This is nearly double the previous worst productivity shortfall ten years after the start of a downturn. On this criterion the slowdown is unprecedented in the past 250 years. We conjecture that this reflects a combination of adverse circumstances, namely, a financial crisis, a weakening impact of ICT and impending Brexit.

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“…Since we do not observe prices at the firm-level in our data set, we revert to using two-digit industry deflators, following e.g. Dias et al (2016), Gorodnichenko et al (2018) and Gopinath et al (2017). This implies we calculate Y is,t actually as P is,t Y is,t /P s,t ,…”

Section: Modelmentioning

confidence: 99%