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Products and Productivity

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  • Andrew Bernard
  • Stephen Redding
  • Peter Schott

Abstract

When firms make decisions about which product to manufacture at a more disaggregated level than observed in the data, measured firm productivity will reflect both true differences in productivity and non-random decisions about which products to manufacture. This paper examines a model of industry equilibrium where firms endogenously sort across products. We use the model to characterize the direction and magnitude of the resulting bias in productivity and to trace the implications for evaluating the aggregate effects of policy reforms such as industry deregulation. The endogenous sorting of firms across products provides a new source of reallocation and leads to biased measures of deregulation’s impact on firm and aggregate productivity.

Suggested Citation

  • Andrew Bernard & Stephen Redding & Peter Schott, 2008. "Products and Productivity," Working Papers 08-22, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:08-22
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    References listed on IDEAS

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    Cited by:

    1. Marijn Verschelde & Michel Dumont & Glenn Rayp & Bruno Merlevede, 2016. "Semiparametric stochastic metafrontier efficiency of European manufacturing firms," Journal of Productivity Analysis, Springer, vol. 45(1), pages 53-69, February.
    2. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2012. "The Empirics of Firm Heterogeneity and International Trade," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 283-313, July.
    3. Andrew B. Bernard & Emily J. Blanchard & Ilke Van Beveren & Hylke Y. Vandenbussche, 2012. "Carry-Along Trade," NBER Working Papers 18246, National Bureau of Economic Research, Inc.
    4. Funke, Michael & Yu, Hao, 2009. "Economic growth across Chinese provinces : insearch of innovation-driven gains," BOFIT Discussion Papers 10/2009, Bank of Finland, Institute for Economies in Transition.
    5. Alessandro Gambini & Alberto Zazzaro, 2013. "Long-lasting bank relationships and growth of firms," Small Business Economics, Springer, vol. 40(4), pages 977-1007, May.
    6. Gabriel Felbermayr & Benjamin Jung, 2011. "Sorting It Out: Technical Barriers to Trade and Industry Productivity," Open Economies Review, Springer, vol. 22(1), pages 93-117, February.
    7. Bernard, Andrew B. & Redding, Stephen & Schott, Peter.K, 2006. "Multi-product firms and product switching," LSE Research Online Documents on Economics 3687, London School of Economics and Political Science, LSE Library.
    8. Benedetti Fasil, Cristiana & Borota, Teodora, 2013. "World trade patterns and prices: The role of productivity and quality heterogeneity," Journal of International Economics, Elsevier, vol. 91(1), pages 68-81.
    9. Kondylis, Florence, 2005. "Agricultural returns and conflict: quasi-experimental evidence from a policy intervention programme in Rwanda," LSE Research Online Documents on Economics 19878, London School of Economics and Political Science, LSE Library.
    10. Facundo Albornoz & Marco Ercolani, 2007. "Learning by Exporting: Do Firm Characteristics Matter? Evidence from Argentinian Panel Data," Discussion Papers 07-17, Department of Economics, University of Birmingham.
    11. José Vicente Blanes Cristóbal & Juliette Milgram Baleix, 2009. "Costes irrecuperables de exportación, productividad y elección de mercado de exportación de las empresas españolas," FEG Working Paper Series 09/04, Faculty of Economics and Business (University of Granada).
    12. Kalina Manova & Zhiwei Zhang, 2008. "China's exporters and importers: firms, products, and trade partners," Working Paper Series 2008-28, Federal Reserve Bank of San Francisco.
    13. Andrew B. Bernard & Ilke Van Beveren & Hylke Vandenbussche, 2014. "Multi-Product Exporters and the Margins of Trade," The Japanese Economic Review, Japanese Economic Association, vol. 65(2), pages 142-157, June.
    14. Lucas Navarro & Raimundo Soto, 2006. "Procyclical Productivity in Manufacturing," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 43(127), pages 193-220.
    15. Schiffbauer, Marc & Siedschlag, Iulia & Ruane, Frances, 2017. "Do foreign mergers and acquisitions boost firm productivity?," International Business Review, Elsevier, vol. 26(6), pages 1124-1140.
    16. Andrew B. Bernard & Ilke Van Beveren & Hylke Vandenbussche, 2010. "Multi-product exporters, carry-along trade and the margins of trade," Working Paper Research 203, National Bank of Belgium.
    17. Nishiyama, Hiroyuki & Yamaguchi, Masao, 2010. "Foreign direct investment, international trade, and firm heterogeneity," Economic Modelling, Elsevier, vol. 27(1), pages 184-195, January.
    18. Axel Demenet, 2016. "Does Managerial Capital also Matter Among Micro and Small Firms in Developing Countries?," Working Papers DT/2016/12, DIAL (Développement, Institutions et Mondialisation).
    19. Thanapol Srithanpong, 2016. "Firm Productivity in Thai Manufacturing Industries: Evidence from Firm-level Panel Data," PIER Discussion Papers 15., Puey Ungphakorn Institute for Economic Research, revised Jan 2016.
    20. Katharina Eck & Stephan Huber, 2016. "Product sophistication and spillovers from foreign direct investment," Canadian Journal of Economics, Canadian Economics Association, vol. 49(4), pages 1658-1684, November.
    21. Fernandes, Ana M. & Paunov, Caroline, 2009. "Does tougher import competition foster product quality upgrading ?," Policy Research Working Paper Series 4894, The World Bank.

    More about this item

    Keywords

    Product choice; Productivity measurement; Firm heterogeneity; Industry deregulation;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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