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Products and Productivity

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  • Andrew Bernard
  • Stephen Redding
  • Peter Schott

Abstract

When firms make decisions about which product to manufacture at a more disaggregated level than observed in the data, measured firm productivity will reflect both true differences in productivity and non-random decisions about which products to manufacture. This paper examines a model of industry equilibrium where firms endogenously sort across products. We use the model to characterize the direction and magnitude of the resulting bias in productivity and to trace the implications for evaluating the aggregate effects of policy reforms such as industry deregulation. The endogenous sorting of firms across products provides a new source of reallocation and leads to biased measures of deregulation’s impact on firm and aggregate productivity.

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File URL: ftp://ftp2.census.gov/ces/wp/2008/CES-WP-08-22.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 08-22.

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Length: 37 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:cen:wpaper:08-22

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Related research

Keywords: Product choice; Productivity measurement; Firm heterogeneity; Industry deregulation;

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References

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Citations

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Cited by:
  1. Kalina Manova & Zhiwei Zhang, 2009. "China's Exporters and Importers: Firms, Products and Trade Partners," NBER Working Papers 15249, National Bureau of Economic Research, Inc.
  2. Andrew B. Bernard & Stephen Redding & Peter.K Schott, 2006. "Multi-product firms and product switching," LSE Research Online Documents on Economics 3687, London School of Economics and Political Science, LSE Library.
  3. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2011. "The Empirics of Firm Heterogeneity and International Trade," NBER Working Papers 17627, National Bureau of Economic Research, Inc.
  4. Gabriel J. Felbermayr & Benjamin Jung, 2008. "Sorting It Out: Technical Barriers to Trade and Industry Productivity," FIW Working Paper series 014, FIW.
  5. Lucas Navarro & Raimundo Soto, 2006. "Procyclical Productivity in Manufacturing," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 43(127), pages 193-220.
  6. José Vicente Blanes Cristóbal & Juliette Milgram Baleix, 2009. "Costes irrecuperables de exportación, productividad y elección de mercado de exportación de las empresas españolas," FEG Working Paper Series 09/04, Faculty of Economics and Business (University of Granada).
  7. Fernandes, Ana M. & Paunov, Caroline, 2009. "Does tougher import competition foster product quality upgrading ?," Policy Research Working Paper Series 4894, The World Bank.
  8. Facundo Albornoz & Marco Ercolani, 2007. "Learning by Exporting: Do Firm Characteristics Matter? Evidence from Argentinian Panel Data," Discussion Papers 07-17, Department of Economics, University of Birmingham.
  9. Kalina Manova & Zhiwei Zhang, 2008. "China's exporters and importers: firms, products, and trade partners," Working Paper Series 2008-28, Federal Reserve Bank of San Francisco.
  10. Benedetti Fasil, Cristiana & Borota, Teodora, 2010. "World Trade Patterns and Prices: The Role of Productivity and Quality Heterogeneity," Working Paper Series 2010:7, Uppsala University, Department of Economics.
  11. Florence Kondylis, 2005. "Agricultural Returns and Conflict: Quasi-Experimental Evidence from a Policy Intervention Programme in Rwanda," CEP Discussion Papers dp0709, Centre for Economic Performance, LSE.
  12. Nishiyama, Hiroyuki & Yamaguchi, Masao, 2010. "Foreign direct investment, international trade, and firm heterogeneity," Economic Modelling, Elsevier, vol. 27(1), pages 184-195, January.

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