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The Causes of Profit Heterogeneity in Large Australian Firms

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  • Andreas Stierwald

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

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    Abstract

    The objective of this paper is to investigate the causes of heterogeneity in firm performance. In particular, the study decomposes unobserved heterogeneity in profitability into firm and industry effects and quantifies the relative importance of both these effects. For a sample of large Australian firms for the period 1995-2005, the estimation results indicate that almost two thirds of the heterogeneity can be explained by differences across firms, and that industry effects are of much less importance. Another result is that the level of total factor productivity, as a component of firm effects, significantly enhances profitability, but also that this relationship is not identical among firms.

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    Bibliographic Info

    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 wp2010n07.

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    Length: 27 pages
    Date of creation: Jun 2010
    Date of revision:
    Handle: RePEc:iae:iaewps:wp2010n07

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    Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
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    Related research

    Keywords: firm performance; determinants of profit; multi-level analysis; firm effects;

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