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Production theory: accounting for firm heterogeneity and technical change

Author

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  • Giovanni Dosi
  • Marco Grazzi
  • Luigi Marengo
  • Simona Settepanella

Abstract

The paper presents a new framework to assess firm level heterogeneity and to study the rate and direction of technical change. Building on the analysis of revealed short-run production functions by Hildenbrand (1981), we propose the (normalized) volume of the zonotope composed by vectors-firms in a narrowly defined industry as an indicator of inter-firm heterogeneity. Moreover, the angles that the main diagonal of the zonotope form with the axes provides a measure of the rates and directions of technical change over time. The proposed framework can easily account for n-inputs and m-outputs and, crucially, the measures of heterogeneity and technical change do not require many of the standard assumptions from production theory.

Suggested Citation

  • Giovanni Dosi & Marco Grazzi & Luigi Marengo & Simona Settepanella, 2013. "Production theory: accounting for firm heterogeneity and technical change," LEM Papers Series 2013/22, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    • Handle: RePEc:ssa:lemwps:2013/22
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    21. Giovanni Dosi & Marco Grazzi, 2006. "Technologies as problem-solving procedures and technologies as input--output relations: some perspectives on the theory of production," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 15(1), pages 173-202, February.
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    Cited by:

    1. Michael Peneder & Fabian Unterlass, 2024. "Die Produktivitätsentwicklung österreichischer Unternehmen in den Jahren 2013 bis 2020. Eine Auswertung von Mikrodaten," WIFO Monatsberichte (monthly reports), WIFO, vol. 97(2), pages 43-56, February.
    2. Giovanni Dosi & Mariacristina Piva & Maria Enrica Virgillito & Marco Vivarelli, 2019. "Technology and employment in a vertically connected economy: a model and an empirical test," DISCE - Quaderni del Dipartimento di Politica Economica dipe0005, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    3. Isabel Almudi & Francisco Fatas-Villafranca & Jesus Palacio & Julio Sanchez-Choliz, 2020. "Pricing routines and industrial dynamics," Journal of Evolutionary Economics, Springer, vol. 30(3), pages 705-739, July.
    4. ARATA Yoshiyuki & ONOZAKI Tamotsu, 2017. "A Compositional Data Analysis of Market Share Dynamics," Discussion papers 17076, Research Institute of Economy, Trade and Industry (RIETI).
    5. Giovanni Dosi & Xiaodan Yu, 2017. "Technological catching-up, sales dynamics and employment growth: evidence from China's manufacturing firms," LEM Papers Series 2017/27, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    6. M. Grazzi & C. Piccardo & C. Vergari, 2017. "Building a firm level dataset for the analysis of industrial dynamics and demography," Working Papers wp2003, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. Dosi, G. & Piva, M. & Virgillito, M.E. & Vivarelli, M., 2021. "Embodied and disembodied technological change: The sectoral patterns of job-creation and job-destruction," Research Policy, Elsevier, vol. 50(4).
    8. S. Settepanella & A. Terni & M. Franciosi & L. Li, 2022. "The robustness of the generalized Gini index," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 45(2), pages 521-539, December.
    9. Atushi Ishikawa & Shouji Fujimoto & Takayuki Mizuno, 2021. "Why does production function take the Cobb–Douglas form?," Evolutionary and Institutional Economics Review, Springer, vol. 18(1), pages 79-102, April.
    10. Giovanni Dosi & Marcelo C. Pereira & Maria Enrica Virgillito, 2017. "The footprint of evolutionary processes of learning and selection upon the statistical properties of industrial dynamics," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(2), pages 187-210.
    11. Yuji Aruka, 2017. "Some new perspectives on the inter-country analysis of the world production system," Evolutionary and Institutional Economics Review, Springer, vol. 14(2), pages 467-498, December.
    12. Giovanni Dosi & Marco Grazzi & Le Li & Luigi Marengo & Simona Settepanella, 2021. "Productivity Decomposition in Heterogeneous Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 615-652, September.
    13. Belloc, Filippo & Valentini, Edilio, 2022. "Digging into the Technological Dimension of Environmental Productivity," FEEM Working Papers 328580, Fondazione Eni Enrico Mattei (FEEM).
    14. Kristiaan Kerstens & Jafar Sadeghi & Ignace Woestyne & John Walden, 2024. "Short-run Johansen frontier-based industry models: methodological refinements and empirical illustration on fisheries," Journal of Productivity Analysis, Springer, vol. 61(1), pages 47-62, February.
    15. Pierluigi Toma, 2020. "Size and productivity: a conditional approach for Italian pharmaceutical sector," Journal of Productivity Analysis, Springer, vol. 54(1), pages 1-12, August.
    16. Giovanni Dosi & Marco Grazzi & Le Li & Luigi Marengo & Simona Settepanella, 2019. "Aggregate Productivity Growth in the Presence of (Persistently) Heterogeneous Firms," LEM Papers Series 2019/26, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    17. Michael Peneder & Catherine Prettner, 2021. "Entwicklung der Produktivität österreichischer Unternehmen von 2008 bis 2018. Auswertung von Mikrodaten für Österreich im Rahmen von Multiprod 2.0," WIFO Studies, WIFO, number 67450, April.
    18. Paternesi Meloni, Walter & Romaniello, Davide & Stirati, Antonella, 2022. "Inflation and the NAIRU: assessing the role of long-term unemployment as a cause of hysteresis," Economic Modelling, Elsevier, vol. 113(C).
    19. Giovanni Dosi & Dario Guarascio & Andrea Ricci & Maria Enrica Virgillito, 2021. "Neodualism in the Italian business firms: training, organizational capabilities, and productivity distributions," Small Business Economics, Springer, vol. 57(1), pages 167-189, June.
    20. Nchare, Karim & Vitouley, Marcel & Kaila, Heidi & Liu, Yanyan, 2022. "A Geometric Analysis of Technological Heterogeneity in the Agricultural Sector: Evidence from Maize in Tanzania," PRCI Research Papers 330119, Michigan State University, Department of Agricultural, Food and Resource Economics, Food Security Group.
    21. Yuji Aruka, 2018. "Hodgson’s bibliometric report and the reconstruction plan of economics," Evolutionary and Institutional Economics Review, Springer, vol. 15(1), pages 189-202, June.

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    More about this item

    Keywords

    Production theory; Heterogeneous firms; Activity Analysis; Technical change; Zonotopes; Production functions;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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