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Does Input Quality Drive Measured Differences in Firm Productivity?

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  • Jeremy T. Fox
  • Valérie Smeets

Abstract

Firms in the same industry can differ in measured productivity by multiples of 3. Griliches (1957) suggests one explanation: the quality of inputs differs across firms. We add labor market history variables such as experience and firm and industry tenure, as well as general human capital measures such as schooling and sex. We also use the wage bill and worker fixed effects. We show adding human capital variables and the wage bill decreases the ratio of the 90th to 10th productivity quantiles from 3.27 to 2.68 across eight Danish manufacturing and service industries. The productivity dispersion decrease is roughly of the same order of magnitude as some competitive effects found in the literature, but input quality measures do not explain most productivity dispersion, despite economically large production function coefficients. We find that the wage bill explains as much dispersion as human capital measures.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16853.

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Date of creation: Mar 2011
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Handle: RePEc:nbr:nberwo:16853

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Cited by:
  1. ONISHI Koichiro & NAGAOKA Sadao, 2012. "Life-cycle Productivity of Industrial Inventors: Education and other determinants," Discussion papers 12059, Research Institute of Economy, Trade and Industry (RIETI).
  2. Amit Gandhi & Salvador Navarro & David Rivers, 2011. "On the Identification of Production Functions: How Heterogeneous is Productivity?," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20119, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  3. TAKII Katsuya, 2011. "Persistent Productivity Differences Between Firms," Discussion papers 11048, Research Institute of Economy, Trade and Industry (RIETI).
  4. Irarrazabal, Alfonso & Moxnes, Andreas & Ulltveit-Moe, Karen-Helene, 2009. "Heterogeneous firms or heterogeneous workers? Implications for the exporter premium and the impact of labor reallocation on productivity," CEPR Discussion Papers 7577, C.E.P.R. Discussion Papers.
  5. Enghin Atalay, 2012. "Materials Prices and Productivity," Working Papers 12-11, Center for Economic Studies, U.S. Census Bureau.
  6. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-65, June.
  7. Giovanni Dosi & Sébastien Lechevalier & Angelo Secchi, 2010. "Interfirm heterogeneity: nature, sources and consequences for industrial dynamics. An introduction," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00642680, HAL.
  8. Ann P. Bartel & Ciaran S. Phibbs & Nancy Beaulieu & Patricia Stone, 2011. "Human Capital and Organizational Performance: Evidence from the Healthcare Sector," NBER Working Papers 17474, National Bureau of Economic Research, Inc.
  9. Cheng, Wenya & Morrow, John & Tacharoen, Kitjawat, 2013. "Productivity As If Space Mattered: An Application to Factor Markets Across China," MPRA Paper 45743, University Library of Munich, Germany.

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