This paper is concerned with the empirical analysis of the evolution of the productivity distribution of Spanish manufacturing firms over the period 1990-1997. Taking as reference models of market dynamics, the paper focuses on the relationship between productivity differences at the firm level and the patterns of entry and exit in the industry. In particular, the productivity distributions of continuing, entering and exiting firms are sistematically compared. The main empirical findings are the following. First, the productivity distribution in Spanish manufacturing firms shifts to the right and concentrates during the period. Second, heterogeneity in productivity levels across firms is persistent. Third, the productivity distribution of continuing firms stochastically dominates the distributions of entering and exiting firms. Fourth, although the differences are not statistically significant, entering firms have higher productivity than exiting firms. Therefore, in the short-run, firm turnover has a small impact on productivity growth. Furthermore, results indicate that, in the long-run, the contribution firm turnover to the evolution of the productivity distribution is positive.