WHY has economic growth been so sluggish in the developed world? The previous post showed that productivity in the global economy had been flat or falling in the last three years. And it suggested that the existence of “zombie” firms—uncompetitive survivors—might be one explanation.

As it happened, the OECD published a new paper yesterday which showed that might indeed be the case. The paper concludes that

the prevalence of, and resources sunk in, zombie firms have risen since the mid-2000s, which is significant given that recessions typically provide opportunities for restructuring and productivity-enhancing allocation

and that

a higher share of industry capital sunk in zombie firms tends to crowd-out the growth—measured in terms of investment and employment—of the typical non-zombie firm. 

All in all

a 3.5% rise in…Continue reading