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Decomposing differences in total factor productivity across firm size

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Author Info
Laia Castany () (Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Universitat de Barcelona)
Enrique López-Bazo () (Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Departament d'Econometria, Estadística i Economia Espanyola, Universitat de Barcelona)
Rosina Moreno () (Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Departament d'Econometria, Estadística i Economia Espanyola, Universitat de Barcelona)

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Abstract

This paper investigates the extent to which the gap in total factor productivity between small and large firms is due to differences in the endowment of factors determining productivity and to the returns associated with these factors. We place particular emphasis on the contribution of differences in the propensity to innovate and in the use of skilled labor across firms of different size. Empirical evidence from a representative sample of Spanish manufacturing firms corroborates that both differences in endowments and returns to innovation and skilled labor significantly contribute to the productivity gap between small and large firms. In addition, it is observed that the contribution of innovation to this gap is caused only by differences in quantity, while differences in returns have no effect; in the case of human capital, however, most of the effect can be attributed to increasing differences in returns between small and large firms.

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Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2007-01.

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Length: 29 pages
Date of creation: Mar 2007
Date of revision: Mar 2007
Handle: RePEc:xrp:wpaper:xreap2007-01

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Postal: Espai de Recerca en Economia, Facultat de Ci�ncies Econ�miques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
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Related research
Keywords: Total Factor Productivity; skilled labor; innovation; firm size; Oaxaca decomposition;

Other versions of this item:

Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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  17. Salvador Barrios & Holger Goerg & Eric Strobl, 2003. "Explaining Firms' Export Behaviour: R&D, Spillovers and the Destination Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(4), pages 475-496, 09. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Laia Castany, 2008. "The Role of Firm Size in Training Provision Decisions: evidence from Spain," IREA Working Papers 200808, University of Barcelona, Research Institute of Applied Economics, revised Jun 2008. [Downloadable!]
  2. Laia Castany, 2008. "The Role of Firm Size in Training Provision Decisions: evidence from Spain," Economics of Education Working Paper Series 0028, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
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