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How Heterogeneous is Productivity? A Comparison of Gross Output and Value Added

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Abstract

In this paper, we study the theoretical and empirical relationship between gross output and value-added models of production. Using plant-level data from Colombia and Chile, we find that estimates of a gross output production function imply fundamentally different patterns of productivity heterogeneity compared to a value-added specification. Our estimates suggest that the specification of the technology may be more important than controlling for the endogeneity of inputs. Insights derived under value added, compared to gross output, could lead to significantly different policy conclusions.

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  • Amit Gandhi & Salvador Navarro & David Rivers, 2017. "How Heterogeneous is Productivity? A Comparison of Gross Output and Value Added," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201727, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    • Handle: RePEc:uwo:hcuwoc:201727
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    3. Tong Li & Yuya Sasaki, 2017. "Constructive Identification of Heterogeneous Elasticities in the Cobb-Douglas Production Function," Papers 1711.10031, arXiv.org.
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    10. Abdoulaye Kané, 2022. "Measurement of total factor productivity: Evidence from French construction firms," EconomiX Working Papers 2022-9, University of Paris Nanterre, EconomiX.
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    18. Kaus, Wolfhard & Slavtchev, Viktor & Zimmermann, Markus, 2020. "Intangible capital and productivity: Firm-level evidence from German manufacturing," IWH Discussion Papers 1/2020, Halle Institute for Economic Research (IWH).
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    21. Derek Kruse & Kristie Briggs & Eric J. Neuman, 2022. "Mitigating endogeneity in corporate social responsibility research: An investigation using a neoclassical production function," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(1), pages 3-15, January.

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