What determines the cyclical behaviour of labor productivity? This article considers intra firm and inter
firm explanations for the correlation between labor productivity and aggregate shocks. From a set of
2100 Portuguese firms with more than 100 workers, between 1995 and 1999, we found that: (1)
aggregate labor productivity was procyclical, although more than half of the firms revealed
countercyclical productivity; (2) procyclical intra firm effects were stronger than countercyclical inter
firm dynamics; (3) both intra and inter firm theories are important to understand the dynamics of labor
productivity; (4) cleansing effects dominated over sullying effects; (5) only a framework integrating
several intra firm theories can explain the observed evidence
