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Working Paper
A Tale of Two Sectors : Why is Misallocation Higher in Services than in Manufacturing?
Recent empirical studies document that the level of resource misallocation in the service sector is significantly higher than in the manufacturing sector. We quantify the importance of this difference and study its sources. Conservative estimates for Portugal (2008) show that closing this gap, by reducing misallocation in the service sector to manufacturing levels, would boost aggregate gross output by around 12 percent and aggregate value added by around 31 percent. Differences in the effect and size of productivity shocks explain most of the gap in misallocation between manufacturing and ...
Working Paper
Every Cloud has a Silver Lining: Cleansing Effects of the Portuguese Financial Crisis
Using firm-level data, this paper shows that the Portuguese financial crisis was a period of intensified productivity-enhancing reallocation. Aggregate productivity gains, both in manufacturing and services, came from relatively higher contributions of entering and exiting firms and from reallocation of resources between surviving firms. At the microlevel, the crisis reduced the probability of survival for high- and low-productivity firms, but it hit low-productivity firms disproportionately harder. We also found important heterogeneous effects across economic sectors regarding input ...