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Idiosyncratic Productivity Shocks and Plant-Level Heterogeneity

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Author Info
Raphael Bergoeing
Andrés Hernando
Andrea Repetto ()

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Abstract

Using plant-level data on Chilean manufacturing firms for the 1980-99 period, we estimate and characterize disaggregate total factor productivity. We show that idiosyncratic productivity shocks are a quantitatively relevant source of the observed heterogeneity in the behavior of plants. Both exit and input demand decisions are correlated with our estimates of plant level productivity. We then use these estimates to study the microeconomic sources of aggregate growth. We decompose productivity dynamics into production reallocation and within plant efficiency changes. We find that both sources of productivity growth have significantly contributed to efficiency gains in Chile during the last two decades. Although reallocation effects are always positive, the magnitude of their contribution is larger during periods of negative or low growth. Within-plant productivity growth contributes positively only during the 1990s, consistently with the existence of a lag between the implementation of major market oriented structural reforms -- mostly undertaken during the late 1970s and early 1980s -- and their complete effect on the economy. Once reforms were consolidated, unbounded within-plants efficiency gains driven by technology adoption and innovation occurred.

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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 173.

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Date of creation: 2003
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Handle: RePEc:edj:ceauch:173

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  5. Deaton, Angus & Paxson, Christina, 1994. "Intertemporal Choice and Inequality," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 437-67, June. [Downloadable!] (restricted)
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  6. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
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  7. Ariel Pakes, 1991. "Dynamic Structural Models: Problems and Prospects. Mixed Continuous Discrete Controls and Market Interactions," Cowles Foundation Discussion Papers 984, Cowles Foundation, Yale University. [Downloadable!]
  8. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September. [Downloadable!] (restricted)
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  11. Mark E. Doms & Timothy Dunne, 1998. "Capital Adjustment Patterns in Manufacturing Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 409-429, April. [Downloadable!] (restricted)
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  12. 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)
  13. 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)
  14. repec:fth:michin:445 is not listed on IDEAS
  15. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
  16. Levinsohn, J. & Petrin, A., 1999. "When Industries Become More Productive, Do Firms?: Investigating Productivity Dynamics," Working Papers 445, Research Seminar in International Economics, University of Michigan.
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  18. Susanto Basu & John G. Fernald, 1995. "Aggregate Productivity and the Productivity of Aggregates," NBER Working Papers 5382, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. 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.
  20. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-68, December. [Downloadable!] (restricted)
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  21. Liu, Lili, 1993. "Entry-exit, learning, and productivity change Evidence from Chile," Journal of Development Economics, Elsevier, vol. 42(2), pages 217-242, December. [Downloadable!] (restricted)
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  1. Roberto Alvarez & Ricardo López, 2004. "Orientación Exportadora y Productividad en la Industria Manufacturera Chilena," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 41(124), pages 315-343. [Downloadable!]
  2. David Greenstreet, 2007. "Exploiting Sequential Learning to Estimate Establishment-Level Productivity Dynamics and Decision Rules," Economics Series Working Papers 345, University of Oxford, Department of Economics. [Downloadable!]
  3. José Miguel Benavente & Christian Ferrada, 2004. "Probability of Survival of New Manufacturing Plants: the case of Chile," Econometric Society 2004 Latin American Meetings 305, Econometric Society. [Downloadable!]
  4. Roberto Álvarez & Rodrigo Fuentes, 2004. "Patterns of Specialization and Economic Growth in Chile by Sector," Working Papers Central Bank of Chile 288, Central Bank of Chile. [Downloadable!]
  5. Raphael Bergoeing & Facundo Piguillem, 2003. "Innovaciones en productividad y dinámica de plantas," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Economics Department, vol. 18(2), pages 3-32, December. [Downloadable!]
  6. Jaime Gatica & Pilar Romaguera, 2005. "El Mercado Laboral en Chile Nuevos Temas y Desafíos," Documentos de Trabajo 210, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
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