International trade, non-trading firms and their impact on labour productivity

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 12 April 2019

Staff Working Paper No. 787

By Stephen Millard, Anamaria Nicolae and Michael Nower

In this paper we examine the impact of non-trading firms on labour productivity and its persistence in response to macroeconomic shocks, through their entry and exit into the domestic market, in a model with monopolistic competition and heterogeneous firms. We quantify the effects of various macroeconomic shocks on labour productivity and we demonstrate that non-trading domestic firms’ entry and exit into the domestic market explains the persistence of labour productivity in response to transitory shocks. We also show that the model successfully replicates the sluggish recovery of labour productivity in the United Kingdom since the Great Recession.

PDFInternational trade, non-trading firms and their impact on labour productivity

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