The Middle Productivity Trap: Dynamics of Productivity Dispersion

CID Research Fellow & Graduate Student Working Paper No. 87

Dany Bahar
September 2017


Using a worldwide firm-level panel dataset I document a "U-shaped" relationship between productivity growth and baseline levels within each country and industry. That is, fast productivity growth is concentrated at both ends of the productivity distribution. This result serves as a potential explanation to two stylized facts documented in the economic literature: the rising productivity dispersion within narrowly defined sectors, and the increasing market share of few yet highly productive firms.

Keywords: productivity, convergence, divergence, dispersion

JEL Classification: D2, O3, O4