Productivity differentials along the development process: A “MESO” approach

“Firms are different”, and everyone knows it by direct experience. From the point of view of productivity differentials, we know that their intensity depends on the interaction of forces acting in the opposite direction, some increasing and others limiting productivity differentials. It is possible to imagine that those forces act with different intensity in developed and developing countries: the catching up process, coupled with a weaker firm selection process, could reinforce productivity differentials in the economic system of less advanced economies. Empirical indications suggest that productivity differential among firms/sectors is effectively higher in poorer countries. This paper is a step to deep this question in more general terms: it proposes and empirically tests a “development” perspective to analyze productivity differentials, and this seems a substantial novelty. Results, with a few limits, support the hypothesis that inter-industry productivity differentials are negatively associated with the level of development.