Should monetary policymakers have sacrificed 1 ½ million jobs for the sake of an extra 1 or 2% of productivity? Hand on heart, I can tell you this one would not knowingly have done so. Of course, this experiment is only illustrative and is based on a number of simplifying assumptions. For example, it assumes there is no adverse effect on the output of firms who do not go bust but who nonetheless find their cashflows squeezed. This would tend to raise the output and employment cost of higher interest rates and make the terms of trade for productivity improvements less favourable still. 16  All speeches are available online at www.bankofengland.co.uk/speeches  16  Acting in the opposite direction, gazelle firms may be able to borrow to avoid bankruptcy in the event of higher interest rates – their solvency threshold might be higher than for zombie companies. If we assumed instead that only the lowest-productivity firms went bust, the boost to productivity is around 3% (Chart 24d). This is more material, but would still need to be weighed against the significant output and employment cost. The Dispersion of Productivity and Wages  A final use to which the distributional data can be put is to analyse whether rising dispersion in productivity among firms is mirrored in rising dispersion of wages among households. Have productivity differences been a contributor to rising income inequalities?
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