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Firm Productivity Differences From Factor Markets

Author

Listed:
  • Wenya Cheng
  • John Morrow

Abstract

We model firm adaptation to local factor markets in which firms care about both the price and availability of inputs. The model is estimated by combining firm and population census data, and quantifies the role of factor markets in input use, productivity and welfare. Considering China's diverse factor markets, we find that within an industry interquartile labor costs vary by 30–80%, leading to 3–12% interquartile differences in TFP. In general equilibrium, homogenization of labor markets would increase real income by 1.33%. Favorably endowed regions attract more economic activity, providing new insights into within†country comparative advantage and specialization.

Suggested Citation

  • Wenya Cheng & John Morrow, 2018. "Firm Productivity Differences From Factor Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 66(1), pages 126-171, March.
    • Handle: RePEc:bla:jindec:v:66:y:2018:i:1:p:126-171
    DOI: 10.1111/joie.12165
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    Cited by:

    1. Pham, Hoang, 2023. "Trade reform, oligopsony, and labor market distortion: Theory and evidence," Journal of International Economics, Elsevier, vol. 144(C).
    2. Zhengwen Liu & Hong Ma, 2021. "Input Trade Liberalization And Markup Distribution: Evidence From China," Economic Inquiry, Western Economic Association International, vol. 59(1), pages 344-360, January.

    More about this item

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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