De Nederlandsche Bank has published an analysis arguing that, as population ageing slows labour supply growth, the Netherlands will need stronger productivity growth to sustain future economic growth, yet low business dynamism is holding this back. The analysis says business creation and closure rates are low and declining, many small firms remain small with limited growth, and relatively large amounts of capital and labour remain tied up in less productive businesses. It concludes that the government can support productivity by strengthening conditions for competition and innovation, while warning that untargeted support measures and some tax arrangements distort market processes. The analysis finds that the Netherlands has relatively few new firms entering and exiting compared with other European countries, slowing the reallocation of resources to more productive companies. Larger firms that do start with employees tend to scale up strongly, suggesting the main weakness is the large share of start-ups without employees and with limited growth ambition. Although weak dynamism can increase the risk of rising market power, De Nederlandsche Bank says this has not produced a strong increase in concentration or markups in the Netherlands over the past fifteen years. It points to further European single market integration and development of a European capital markets union as ways to improve scale and growth opportunities, especially in services, and suggests examining whether Dutch insolvency law contributes to low business exit. Targeted innovation and entrepreneurship measures can help where they address clear market failures, but tax advantages for self-employed workers and small firms, and prolonged untargeted support, can discourage growth and increase misallocation of labour and capital, with pandemic support cited as an example where such misallocation rose and has not yet returned to pre-pandemic levels.
De Nederlandsche Bank 2026-05-07
De Nederlandsche Bank analysis finds low business dynamism and untargeted support are weighing on Dutch productivity growth
De Nederlandsche Bank research argues that slowing labour supply growth from population ageing will require stronger productivity growth in the Netherlands, but low business dynamism is constraining this. It highlights low and declining firm entry and exit, many small firms with limited growth, and persistent misallocation of labour and capital, and concludes that stronger competition, innovation, deeper European single market and capital markets integration, and more targeted support measures are needed, while untargeted support and certain tax advantages for self-employed workers and small firms may distort markets.