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During the Greek Depression, which saw a 22% decline in output, young firms and small
firms experienced significantly steeper declines in sales growth compared to their mature
and larger counterparts. This disparity was largely driven by adverse demand shocks and
was further intensified by financing constraints, with a significant interaction between these
two factors amplifying the impact. Firm-level heterogeneity played a critical role in shaping
macroeconomic outcomes, with the disproportionate impact on young firms and small firms
accounting for approximately one-quarter of the total output decline during the crisis.
