Keywords

CompNet, heterogeneity, productivity distribution, resource allocation

This paper explores microeconomic aspects of productivity in Croatia based on Competitiveness Research Network (CompNet) main findings. Several stylised facts emerge from our analysis. Overall, the Croatian economy consists of a small number of highly productive firms and a large portion of relatively unproductive firms, no matter the measure used. During the Great Recession productivity in Croatia decreased and this was accompanied by a sharper percentage point fall in the productivity of relatively unproductive firms, while top decile firms were less hit by the recession. Our estimates show that the recession had beneficial effects on resource allocation of labour among firms, thus increasing productivity. These benefits were especially present in the tradable sector. However, the recession was accompanied by growing misallocation of capital, which adversely affected productivity dynamics ubiquitously across all sectors.