Portuguese capital in the XXIst century: a tale of misallocation?

We analyze the patterns of productivity in the Portuguese manufacturing sectorfrom 2006 to 2017. With a more comprehensive firm-level dataset and with a largertime-span, we confirm the findings of Gopinath et al. (2017): there is evidence ofincreased capital misallocation. However, we show that the results hinge criticallyon the capital stock measure used. Relying on an improved measure, we find twokey results, contradicting the initial ones: (i) a declining economic potential of themanufacturing firms, measured by an hypothetical efficient-level TFP, likely driven bythe destruction of productive capital during the period; and (ii) a reduction in capitalmisallocation, as actual TFP declined less than the theoretical one.Keywords