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Is Firm Productivity Related to Size and Age? The Case of Large Australian Firms

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  • Alfons Palangkaraya

    ()
    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Jongsay Yong

    ()
    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Andreas Stierwald

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

We investigate the relationship between productivity, size and age of large Australian firms employing more than 100 employees or holding assets in excess of $100 million. In addition, we also investigate the extent of productivity persistence among these firms by looking at transition matrices of productivity distribution and productivity-rank mobility. The empirical study is based on the IBISWorld database used to estimate translog cost function to measure (a residual based) productivity. We find evidence, though somewhat weak, that larger and older firms are on average less productive. Furthermore, we find stronger evidence for a high degree of inertia in terms of productivity ranking within an industry.

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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2006n07.

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Length: 29 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:iae:iaewps:wp2006n07

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  1. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  2. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, vol. 79(1), pages 1-45, March.
  3. Gardiner, Karen & Hills, John, 1999. "Policy Implications of New Data on Income Mobility," Economic Journal, Royal Economic Society, vol. 109(453), pages F91-111, February.
  4. Stephen P. King, 2000. "Introduction," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 33(1), pages 65-66.
  5. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  6. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  7. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
  8. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-38, December.
  9. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
  10. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
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Cited by:
  1. Chen, Minjia & Guariglia, Alessandra, 2013. "Internal financial constraints and firm productivity in China: Do liquidity and export behavior make a difference?," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1123-1140.
  2. Minjia Chen & Alessandra Guariglia, . "Financial constraints and firm productivity in China: do liquidity and export behavior make a difference?," Discussion Papers 11/09, University of Nottingham, GEP.

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