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Credit conditions dragged on productivity
We can add financial conditions to the list of plausible explanations for the global productivity slowdown. New International Monetary Fund research finds that companies with a lot of leverage or a lot of debt maturing during the crisis era saw a larger total factor productivity slowdown than their counterparts on firmer financial footing.
What's more, the pullback was worse in countries where credit conditions tightened more right after Lehman Brothers collapsed in September 2008. Balance-sheet vulnerable businesses cut their intangible investment, such as research and development and workforce training, which in turn slowed their efficiency improvements. On average, these trends could have accounted for about a third of the post-crisis slowdown in productivity growth, the researchers write.
What's more, the pullback was worse in countries where credit conditions tightened more right after Lehman Brothers collapsed in September 2008. Balance-sheet vulnerable businesses cut their intangible investment, such as research and development and workforce training, which in turn slowed their efficiency improvements. On average, these trends could have accounted for about a third of the post-crisis slowdown in productivity growth, the researchers write.
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