This paper investigates two explanations for why industries might become more productive over time. The first explanation, termed the real productivity case,' is one in which firms become more productive and this leads to more productive industries. The second explanation, termed the rationalization case,' is one in which firm productivity is constant, but productive firms expand while less productive firms either shrink or exit. Each case has very different implications for factor markets, long term growth prospects, and public policy regarding productivity. Further, one can only distinguish between these two cases with plant- or firm-level data. We investigate the empirical relevance of the two cases using the Chilean manufacturing census. We find that the rationalization case explains much of the measured increase in industry productivity. When industry productivity fails, the rationalization case appears much less important. We also contribute to the applied econometric literature on productivity estimation as we show that the value-added production function is especially well-suited to a simple extension of recent methods developed by Oiley and Pakes.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number
445.
Find related papers by JEL classification: F10 - International Economics - - Trade - - - General F14 - International Economics - - Trade - - - Country and Industry Studies of Trade O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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.)