Declining and diverging investment responsiveness to firm productivity

2026

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AI-generated summary

1) Business investment has become less responsive to firm productivity across OECD economies, indicating a weakening of capital reallocation towards more productive firms.
2) This paper documents a decline in investment responsiveness to firm productivity, analyzes its divergence between frontier and non-frontier firms, and explores the role of market and policy environments.
3) It finds that external financial dependence, inefficient insolvency regimes, and market concentration weaken investment responsiveness, while trade openness strengthens it.
Tags: investment, productivity, OECD, business investment, capital reallocation

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