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Are Apparent Productive Spillovers a Figment of Specification Error?

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Author Info
Susanto Basu
John G. Fernald

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Abstract

Using data on gross output for two-digit manufacturing industries, we find that an increase in the output of one manufacturing sector has little or no significant effect on the productivity of other sectors. Using value-added data, however, we confirm the results of previous studies which find that output spillovers instead appear large. We provide an explanation for these differences, showing why, with imperfect competition, the use of value-added data leads to a spurious finding of large apparent external effects.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5073.

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Date of creation: Mar 1999
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Publication status: published as Journal of Monetary Economics, vol. 36, pp. 165-188, 1995
Handle: RePEc:nbr:nberwo:5073

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Find related papers by JEL classification:
C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity

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  17. Sato, Kazuo, 1976. "The Meaning and Measurement of the Real Value Added Index," The Review of Economics and Statistics, MIT Press, vol. 58(4), pages 434-42, November. [Downloadable!] (restricted)
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