Allocative Efficiency, Firm Dynamics, and Productivity in the Baltics: Republic of Estonia

July 25, 2025

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Bingjie Hu, and Can Ugur. "Allocative Efficiency, Firm Dynamics, and Productivity in the Baltics: Republic of Estonia", Selected Issues Papers 2025, 103 (2025), accessed August 13, 2025, https://doi.org/10.5089/9798229019071.018

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Summary

Labor productivity growth has decelerated in the Baltic economies during the past two decades, with the downturn accelerating in recent years. This Selected Issues Paper analyzes the roles of allocative efficiency and firm dynamics in productivity growth. Our results suggest that the lack of allocative efficiency has hindered productivity growth, while the contribution of firm entry and exit has been limited. The findings underpin the need for structural reforms to improve allocation of capital and labor, ease the bottlenecks faced by young innovative firms, and facilitate the exit of unviable firms.

Subject: Employment, Labor, Labor productivity, Production, Productivity

Keywords: Allocative efficiency, Baltic economies, Baltics, Business dynamism, Competitiveness, Employment, Firm dynamics, Labor productivity, Labor productivity distribution, Labor productivity growth decomposition exercise, Productivity, Productivity growth, TFP growth decomposition, Unviable firm

Publication Details

Pages:

17
Volume:

2025
DOI:

https://doi.org/10.5089/9798229019071.018
Issue:

103
Series:

Selected Issues Paper No. 2025/103
Stock No:

SIPEA2025103
ISBN:

9798229019071
ISSN:

2958-7875

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