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Output Market Segmentation and Productivity

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  • Chad Syverson

Abstract

Recent empirical investigations have shown enormous plant-level productivity heterogeneity, even within narrowly defined industries. Most of the theoretical explanations for this have focused on factors that influence the production process, such as idiosyncratic technology shocks or input price differences. I claim that characteristics of the output demand markets can also have predictable influences on the plant-level productivity distribution within an industry. Specifically, an industry’s degree of output market segmentation (i.e., the substitutability of one plant’s output for another’s in that industry) should impact the dispersion and central tendency of the industry’s plant-level productivity distribution. I test this notion empirically by seeing if measurable cross-sectional variation in market segmentation affects moments of industry’s plant-level productivity distribution moments. I find significant and robust evidence consistent with this notion.

Suggested Citation

  • Chad Syverson, 2001. "Output Market Segmentation and Productivity," Working Papers 01-07, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:01-07
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    File URL: https://www2.census.gov/ces/wp/2001/CES-WP-01-07.pdf
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    References listed on IDEAS

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    1. F. Biesmans, 1977. "A Survey," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 48(1), pages 5-36, January.
    2. Martin L. Weitzman, 1994. "Monopolistic Competition with Endogenous Specialization," Review of Economic Studies, Oxford University Press, vol. 61(1), pages 45-56.
    3. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    4. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    5. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1989. "The Growth and Failure of U. S. Manufacturing Plants," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 671-698.
    6. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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    Cited by:

    1. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
    2. Marcus Asplund & Volker Nocke, 2003. "Firm Turnover in Imperfectly Competitive Markets," PIER Working Paper Archive 03-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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    Keywords

    CES; economic; research; micro; data; microdata; chief; economist;

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