We show that the TFP growth of European micro, small, and medium-sized firms (SMEs) diverged from large firms after the global financial crisis. The average postcrisis TFP growth of medium-sized, small, and micro firms was, respectively, 1.1, 2.9, and 5.4 percentage points lower than that of large firms. This SME productivity gap is larger for firms with more severe credit supply shocks. The gap is partially attributable to a larger postcrisis reduction in intangible capital at SMEs than at large firms. Horseraces suggest that SME indicators are more robust and more powerful predictors of postcrisis TFP growth than other indicators.

We investigate how demand conditions affect employers’ provision of safety—something about which theory is ambivalent. Positive demand shocks relax financial constraints that limit safety investment but simultaneously raise the opportunity cost of increasing safety rather than production. We study the US metals mining sector, leveraging exogenous demand shocks from short-term variation in global commodity prices. We find that positive price shocks substantially increase workplace injury rates and safety regulation noncompliance. While these results indicate the general dominance of the opportunity cost effect, shocks that only increase mines’ cash flow lower injury rates, illustrating that financial constraints also affect safety.