Presentation by Sara Calligaris, Economist, Productivity, Innovation and Entrepreneurship Division, OECD at the 17th OECD Spatial Productivity Lab webinar held on 14 September 2022. More info https://oe.cd/spl

1. THE LINK BETWEEN BUSINESS DYNAMISM
AND PRODUCTIVITY - DISCUSSION
Sara Calligaris
Science, Technology and Innovation (STI) Directorate, OECD
Business dynamism and regional productivity
Spatial productivity for regional and local development 17th meeting
14 September 2022
Joint work with: Giuseppe Berlingieri, Flavio Calvino, Chiara Criscuolo, Isabelle Desnoyers-James,
Andrea Greppi, Francesco Manaresi, Rudy Verlhac and many other colleagues from the PIE Division

2. 1. Market concentration has increased.
2. Markups have increased.
3. Profit share of GDP has increased.
4. The labour share of output has declined.
5. Market concentration and labour share are negatively associated.
6. Labour productivity gap between frontier and laggard firms has widened.
7. Firm entry rate and the share of young firms in economic activity have declined.
8. Job reallocation and churn have slowed.
9. The dispersion of firm growth rates has gone down.
10. The productivity growth has fallen.
These trends have been shown mainly for the US.  OECD work touches upon several of these issues,
identifying some of these patterns across a large set of countries.
Akcigit and Ates (2021): 10 facts on declining business
dynamism

3. • Shift to an intangible- and knowledge-intensive economy
– Digital technologies lower entry costs, ease sharing of ideas, ease market
penetration
– Need complementary investments in intangibles, which are non-rival and
scalable
– Economies of scale and network externalities can reinforce winner-takes-most
dynamics
• This may generate
– Higher barriers to diffusion, lower experimentation and dynamism
– Advantages for larger firms that gain market shares and apply higher mark-ups
Why? Shift to an intangible- and knowledge-intensive
economy

4. What do we see so far in OECD work: in digital-intensive
sectors higher increase in concentration and mark-ups
-0.02
-0.01
0
0.01
0.02
0.03
0.04
0.05
0.06
2002 2004 2006 2008 2010 2012 2014 2016 2018
All High digital intensity Low digital intensity
Note: unconditional averages of firm-level log markups, assuming a
Cobb-Douglas production function
Source: Orbis database.
Mark-ups increased faster in digital-intensive sectors
Note: Share of sales accounted for by 8 largest business groups in
the available countries of the euro area.
Source: Orbis and Zephyr database.
Increases in concentration (share of sales top 8) have
been higher in digital-intensive sectors
-0.04
-0.02
0.00
0.02
0.04
0.06
0.08
0.10
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Change since 2000
High digital intensity Low digital intensity

5. What do we see so far in OECD work: in digital-intensive sectors
higher productivity divergence and lower catch-up
Note: calculations based on ORBIS updating methodology from
Andrews, Criscuolo and Gal., 2016 and using the Calvino et al.,
2018 taxonomy
Increases productivity dispersion have been higher in
digital-intensive sectors
Note: difference in LP growth, due to the catch-up effect in industries
with low vs. high values of the indicators considered.
Source: Berlingieri, Calligaris, Criscuolo and Verlhac (2020)
Laggards catch-up at a lower speed in more digital and
knowledge-intensive industries

6. What do we see so far in OECD work: in digital-intensive sectors
faster declines in entry rates and job reallocation rates
Entry rates declined faster in digital intensive sectors
Notes: averages within country-sectors. Cumulative changes in
percentage points.
Source: Calvino and Criscuolo (2019)
Job reallocation rates declined faster in digital
intensive sectors
Notes: averages within country-sectors. Cumulative changes in
percentage points.
Source: Calvino and Criscuolo (2019)

7. • Fostering innovation, mobility and experimentation
– Innovation at the top and sharing of knowledge
– Framework conditions for entrepreneurship and reallocation
– Reducing barriers to job mobility
– Addressing the regulatory challenges of the digital economy
• Boost technology diffusion
– Increase firms’ awareness and absorptive capacity
– Skills, finance, support to R&D
– Competitive pressures, openness and market size
• Some policies are likely to bring double dividends.
Policy is key for an intangibles-fuelled inclusive growth
Particularly relevant for the
post-COVID-19 recovery

8. THANK YOU!
sara.calligaris@oecd.org