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Decomposing differences in total factor productivity across firm size

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Author Info
Laia Castany () (Faculty of Economics, University of Barcelona)
Enrique Lopez-Bazo () (Faculty of Economics, University of Barcelona)
Rosina Moreno () (Faculty of Economics, University of Barcelona)

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Abstract

This paper investigates the extent to which the gap in total factor productivity between small and large firms is due to differences in the endowment of factors determining productivity and to the returns associated with these factors. We place particular emphasis on the contribution of differences in the propensity to innovate and in the use of skilled labor across firms of different size. Empirical evidence from a representative sample of Spanish manufacturing firms corroborates that both differences in endowments and returns to innovation and skilled labor significantly contribute to the productivity gap between small and large firms. In addition, it is observed that the contribution of innovation to this gap is caused only by differences in quantity, while differences in returns have no effect; in the case of human capital, however, most of the effect can be attributed to increasing differences in returns between small and large firms.

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Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 200705.

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Length: 25 pages
Date of creation: Mar 2007
Date of revision: Mar 2007
Handle: RePEc:ira:wpaper:200705

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Web page: http://www.ub.edu/irea/
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Keywords: Total Factor Productivity skilled labor innovation firm size Oaxaca decomposition

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  5. Javier Gardeazabal & Arantza Ugidos, 2004. "More on Identification in Detailed Wage Decompositions," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 1034-1036, 04. [Downloadable!] (restricted)
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  6. Salvador Barrios & Holger Goerg & Eric Strobl, 2003. "Explaining Firms' Export Behaviour: R&D, Spillovers and the Destination Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(4), pages 475-496, 09. [Downloadable!] (restricted)
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  9. Cohen, Wesley M & Klepper, Steven, 1996. "Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 232-43, May. [Downloadable!] (restricted)
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  13. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier. [Downloadable!] (restricted)
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  18. Huergo, Elena & Jaumandreu, Jordi, 2004. "Firms' age, process innovation and productivity growth," International Journal of Industrial Organization, Elsevier, vol. 22(4), pages 541-559, April. [Downloadable!] (restricted)
  19. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring. [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. Laia Castany, 2008. "The Role of Firm Size in Training Provision Decisions: evidence from Spain," Economics of Education Working Paper Series 0028, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  2. Laia Castany, 2008. "The Role of Firm Size in Training Provision Decisions: evidence from Spain," IREA Working Papers 200808, University of Barcelona, Research Institute of Applied Economics, revised Jun 2008. [Downloadable!]
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