Firm growth and productivity growth: evidence from a panel VAR

This paper offers new insights into the processes of firm growth by applying a reduced form vector autoregression (VAR) model to longitudinal panel data on French manufacturing firms (1996-2004). We observe the co-evolution of key variables such as growth of employment, sales, and gross operating surplus, as well as growth of multifactor productivity. It seems that employment growth is negatively associated with subsequent growth of productivity. This latter result, however, is sensitive to our choice of productivit indicator, i.e. multifactor productivity or labour productivity