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Products and Productivity

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Author Info
Andrew Bernard
Stephen Redding
Peter Schott

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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: http://www.ces.census.gov/index.php/ces/cespapers?down_key=101829
File Format: application/pdf
File Function: First version, 2008
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Publisher Info
Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 08-22.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 37 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:cen:wpaper:08-22

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Web page: http://www.ces.census.gov

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

Other versions of this item:

Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November. [Downloadable!] (restricted)
    Other versions:
  2. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-61, July-Aug.. [Downloadable!] (restricted)
    Other versions:
  3. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November. [Downloadable!] (restricted)
  5. Tybout, James & de Melo, Jamie & Corbo, Vittorio, 1991. "The effects of trade reforms on scale and technical efficiency : New evidence from Chile," Journal of International Economics, Elsevier, vol. 31(3-4), pages 231-250, November. [Downloadable!] (restricted)
    Other versions:
  6. John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  7. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-30, April. [Downloadable!] (restricted)
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    Other versions:
  15. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November. [Downloadable!] (restricted)
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    Other versions:
  17. Shaked, Avner & Sutton, John, 1982. "Imperfect information, perceived quality, and the formation of professional groups," Journal of Economic Theory, Elsevier, vol. 27(1), pages 170-181, June. [Downloadable!] (restricted)
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  19. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 53-82, January. [Downloadable!] (restricted)
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    Other versions:
  21. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 317-341, 04. [Downloadable!] (restricted)
    Other versions:
  22. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
  23. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May. [Downloadable!] (restricted)
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  25. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Blackwell Publishing, vol. 69(1), pages 245-76, January.
    Other versions:
  26. C.J. Krizan & John Haltiwanger & Lucia Foster, 2002. "The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade," Working Papers 02-18, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  27. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July. [Downloadable!] (restricted)
  28. repec:rus:hseeco:122439 is not listed on IDEAS
  29. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers," Economic Journal, Royal Economic Society, vol. 92(365), pages 73-86, March. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bernard, Andrew & Redding, Stephen J & Schott, Peter, 2006. "Multi-Product Firms and Product Switching," CEPR Discussion Papers 5708, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Gabriel J. Felbermayr & Benjamin Jung, . "Sorting It Out: Technical Barriers to Trade and Industry Productivity," FIW Working Paper series 014, FIW. [Downloadable!]
  3. Lucas Navarro & Raimundo Soto, 2006. "Procyclical Productivity in Manufacturing," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 43(127), pages 193-220. [Downloadable!]
  4. 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. [Downloadable!]
  5. Fernandes, Ana M. & Paunov, Caroline, 2009. "Does tougher import competition foster product quality upgrading ?," Policy Research Working Paper Series 4894, The World Bank. [Downloadable!]
  6. 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. [Downloadable!]
  7. 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. [Downloadable!]
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