A social network model for the labor productivity in different European countries

This paper uses firm-level data recorded in the Amadeus database to investigate the distribution of labor productivity in different European countries. We find that the upper tail of the empirical productivity distributions follows a decaying power-law, whose exponent α is obtained by a semi-parametric estimation technique recently developed by Clementi et al. (2006). The emergence of “fat tails” in productivity distribution has already been detected in Di Matteo et al. (2005) and explained by means of a model of social network. Here we show that this model is tested on a broader sample of countries having different patterns of social network structure. These different social attitudes, measured using a social capital indicator, reflect in the power-law exponent estimates, verifying in this way the existence of linkages among firms’ productivity performance and social network. Finally, we study the relationships of aggregate productivity growth with social capital and the tail exponents.