This paper reviews research that uses longitudinal microdata to document productivity movements and to examine factors behind productivity growth. The research explores the dispersion of productivity across firms and establishments, the persistence of productivity differentials, the consequences of entry and exit, and the contribution of resource reallocation across firms to aggregate productivity growth. The research also reveals important factors correlated with productivity growth, such as managerial ability, technology use, human capital, and regulation. The more advanced literature in the field has begun to address the more difficult questions of the causality between these factors and productivity growth.

This paper investigates the effect of idiosyncratic (firm-level) policy distortions on aggregate outcomes. Exploiting harmonized firm-level data for a number of countries, we show that there is substantial and systematic cross-country variation in the within-industry covariance between size and productivity. We develop a model in which heterogeneous firms face adjustment frictions (overhead labor and quasi-fixed capital) and distortions. The model can be readily calibrated so that variations in the distribution of distortions allow matching the observed cross-country moments. We show that the differences in the distortions that account for the size-productivity covariance imply substantial differences in aggregate performance. (JEL D24, L25, O47)

In this paper, we present cross-country evidence on firm size distribution, firm demographic and post-entry performance for 10 OECD countries. We use harmonized firm-level data drawn from business registers or social security records.These data enable international comparisons and the identification of idiosyncratic country effects. While average firm size differs across countries, due to both sectoral specialization and within-sector characteristics, we find similar degrees of firm churning across countries. In most of them, about 20% of firms enter and exit most markets every year; and about 20–40% of entering firms fail within the first 2 years of life. However, post-entry growth of successful entrants is much higher in the USA than in Europe, which may be indicative of barriers to firm growth as opposed to barriers to entry.