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Measuring Aggregate Productivity Growth Using Plant-Level Data

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  • Amil Petrin
  • James Levinsohn

Abstract

We define aggregate productivity growth as the change in aggregate final demand minus the change in the aggregate cost of primary inputs. We show how to aggregate plant-level data to this measure and how to use plant-level data to decompose our measure into technical efficiency and reallocation components. This requires us to confront the "non-neoclassical" features that impact plant-level data including plant-level heterogeneity, the entry and exit of goods, adjustment costs, fixed and sunk costs, and market power. We compare our measure of aggregate productivity growth to several competing variants that are based only on a single plant-level factor of technical efficiency. We show that theory suggests our measure may differ substantially from these measures of aggregate productivity growth. We illustrate this using panel data from manufacturing industries in Chile. We find that our measure does differ substantially from other widely used measures with especially marked differences in the fraction of productivity growth attributed to reallocation.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11887.

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Date of creation: Dec 2005
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Handle: RePEc:nbr:nberwo:11887

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Cited by:
  1. Stefano Federico & Gaetano Alfredo Minerva, 2007. "Outward FDI and local employment growth in Italy," Temi di discussione (Economic working papers) 613, Bank of Italy, Economic Research and International Relations Area.
  2. Robert Breunig & Marn-Heong Wong, 2007. "A Richer Understanding of Australia’s Productivity Performance in the 1990s: Improved estimates based upon firm-level panel data," CEPR Discussion Papers 545, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  3. Marc J. Melitz & Sašo Polanec, 2012. "Dynamic Olley-Pakes Productivity Decomposition with Entry and Exit," NBER Working Papers 18182, National Bureau of Economic Research, Inc.
  4. Guido Sandleris & Mark L.J. Wright, 2011. "The Costs of Financial Crises: Resource Misallocation, Productivity and Welfare in the 2001 Argentine Crisis," NBER Working Papers 17552, National Bureau of Economic Research, Inc.
  5. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-65, June.
  6. Shuyun Li, 2011. "Costly external finance, reallocation, and aggregate productivity," Journal of Productivity Analysis, Springer, vol. 35(3), pages 181-195, June.
  7. Amil Petrin & Jagadeesh Sivadasan, 2006. "Job Security Does Affect Economic Efficiency: Theory, A New Statistic, and Evidence from Chile," NBER Working Papers 12757, National Bureau of Economic Research, Inc.
  8. Sophie Osotimehin, 2013. "Aggregate productivity and the allocation of resources over the business cycle," Virginia Economics Online Papers 404, University of Virginia, Department of Economics.

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