Productivity Growth in Romania: A Firm-Level Analysis

25 Pages Posted: 15 Nov 2019

See all articles by Mariana Iootty

Mariana Iootty

World Bank

Jorge Peña

Institute for Advanced Study in Toulouse

Donato De Rosa

World Bank

Date Written: October 15, 2019

Abstract

This paper examines productivity growth in Romania using balance sheet data for a census of Romanian firms in 2011-17. Three measures of productivity are estimated: labor productivity, revenue total factor productivity, and revenue total factor productivity adjusted for markups. Drawing from these measures, the paper follows a two-step approach to answer two fundamental questions: (i) who are the firms -- and what are their key characteristics -- driving and dragging productivity growth in Romania? and (ii) what are the drivers behind productivityexpansion? A first step of the analysis characterizes productivity leaders and laggards, finding that companies at the domestic productivity frontier are older and larger, have higher capital intensity, and pay higher wages. Domestic market leaders charge higher markups, especially in manufacturing, but are not becoming more efficient. A second step of the analysis decomposes aggregate productivity growth and finds that reallocation of market shares to more efficient players has been the main driver in manufacturing but not in services, which are typically more sheltered from competition. At the same time, individual firms are becoming less productive, suggesting that there is scope to improve firm capabilities, particularly in services. These findings suggest a policy agenda for Romania centered on removing distortions to competition and boosting human capital.

Suggested Citation

Iootty, Mariana and Peña, Jorge and De Rosa, Donato, Productivity Growth in Romania: A Firm-Level Analysis (October 15, 2019). World Bank Policy Research Working Paper No. 9043, Available at SSRN: https://ssrn.com/abstract=3485928

Mariana Iootty

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Jorge Peña (Contact Author)

Institute for Advanced Study in Toulouse ( email )

31015 Toulouse, Cedex 6
France

Donato De Rosa

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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