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Using Portugal's extensive matched employer-employee data set, this paper documents an unusual feature of the Portuguese economy. For decades, the entire Portuguese firm size distribution has been shifting to the left. The authors argue in this paper that Portugal's shrinking firms are linked to the country's anemic growth and low productivity. They show that the shift in the Portuguese firm size distribution is not reflected in other advanced industrial economies for which they have been able to obtain comparable data. Careful attempts to account for expanding data coverage, a structural shift from manufacturing to services, and aggressive efforts to "Demonopolize" the Portuguese economy leave about half of this shift unexplained by these factors.
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