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In Germany, the productivity of professional services, a sector dominated by micro and small firms, declined by 40 percent between 1995 and 2014. This productivity decline also holds true for professional services in other European countries. Using a German firm-level dataset of 700,000 observations between 2003 and 2017, we analyze this largely uncovered phenomenon among professional services, the 4th largest sector in the EU15 business economy, which provide important intermediate services for the rest of the economy. We show that changes in the value chain explain about half of the decline and the increase in part-time employment is a further minor part of the decline. In contrast to expectations, the entry of micro and small firms, despite their lower productivity levels, is not responsible for the decline. We also cannot confirm the conjecture that weakening competition allows unproductive firms to remain in the market.
We investigate how the economic consequences of the pandemic, and of the government-mandated measures to contain its spread, affect the self-employed – particularly women – in Germany. For our analysis, we use representative, real-time survey data in which respondents were asked about their situation during the COVID-19 pandemic. Our findings indicate that among the self-employed, who generally face a higher likelihood of income losses due to COVID-19 than employees, women are 35% more likely to experience income losses than their male counterparts. Conversely, we do not find a comparable gender gap among employees. Our results further suggest that the gender gap among the self-employed is largely explained by the fact that women disproportionately work in industries that are more severely affected by the COVID-19 pandemic. Our analysis of potential mechanisms reveals that women are significantly more likely to be impacted by government-imposed restrictions, i.e. the regulation of opening hours. We conclude that future policy measures intending to mitigate the consequences of such shocks should account for this considerable variation in economic hardship.