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Are apparent productive spillovers a figment of specification error?

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  • Susanto Basu
  • John G. Fernald

Abstract

Using data on gross output for two-digit manufacturing industries, we find that an increase in the output of one manufacturing sector has little or no significant effect on the productivity of other sectors. Using value-added data, however, we confirm the results of previous studies which find that output spillovers instead appear large. We provide an explanation for these differences, showing why, with imperfect competition, the use of value-added data leads to a spurious finding of large apparent external effects.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 463.

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Date of creation: 1994
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Handle: RePEc:fip:fedgif:463

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Keywords: Productivity;

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