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CEP discussion paper

The best versus the rest: divergence across firms during the global productivity slowdown


We document that labor productivity of the globally most productive firms – the “frontier” – has diverged from all other firms – the “rest” – throughout the 2000s. This divergence remains after controlling for capital intensity and markups, and is strongest in ICT services, indicative of “winnertakes-all” dynamics. We also find weakening catch-up and market selection below the frontier, which can explain why this divergence at the firm level is linked to weaker aggregate productivity. The divergence is found to be stronger in industries where product market regulations are less competition friendly, highlighting the need for regulatory policy to improve the contestability of markets.


Dan Andrews, Chiara Criscuolo and Peter N. Gal

14 August 2019     Paper Number CEPDP1645

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This CEP discussion paper is published under the centre's Growth programme.