in unproductive firms. These results do not change when the analysis controls for the extent to which firms have ties with banks that are less capitalized, rely more on sticky deposit funding, and have higher ratios of nonperforming or restructured loans. This suggests that the effects of firms’ reliance on PSBs are most likely related to these banks’ governance and supervision as opposed to performance. Hence, adoption of policies that aim to improve the governance and supervision of PSBs or that reduce public bank ownership (via privatizations) may be necessary
most advanced economies ( OECD, 2019 ). This paper singles out which sectors in Italy would benefit most from removing entry and/or exit regulatory barriers in relation to their characteristics. A theoretical model of monopolistic competition is developed which predicts that removing entry barriers is most efficient in sectors with high markups, while removing exit barriers is most efficient in sectors with a large number of low productivity firms. Using firm-level data, sectors are classified according to their average markup and mass of unproductive firms. In
G − Y 0 B ) . Figure 4 illustrates the decomposition of ( Y t − Y 0 ) into ( Y t G − Y 0 G ) and ( Y t B − Y 0 B ). The figure shows that the restructuring cost in terms of decline in the output of the least-productive firms is modest. The initial output of the least-productive firms ( Y 0 B ) amounts to 0.8 percent of aggregate output, and therefore the loss of output by closing those unproductive firms is 0.8 percent of aggregate output. The figure also indicates that the effect of restructuring on more-productive firms’ production can be substantial
1 Introduction Many developing economies are characterized by large informal sectors which are comprised of unproductive firms and which provide low-paying jobs ( La Porta & Schleifer, 2014) . Two arguments are frequently put forward for why informality might be a contributing factor to aggregate income differences across countries. Firstly, informality may induce a misallocation of capital and labor towards less productive firms thereby lowering aggregate productivity ( Hsieh & Klenow, 2009) . Secondly, informality impedes the proper collection of taxes