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Materials Prices and Productivity

  • Enghin Atalay

There is substantial within-industry variation, even within industries that use and produce homogeneous inputs and outputs, in the prices that plants pay for their material inputs. I explore, using plant-level data from the U.S. Census Bureau, the consequences and sources of this variation in materials prices. For a sample of industries with relatively homogeneous products, the standard deviation of plant-level productivities would be 7% lower if all plants faced the same materials prices. Moreover, plant-level materials prices are both persistent across time and predictive of exit. The contribution of net entry to aggregate productivity growth is smaller for productivity measures that strip out di¤erences in materials prices. After documenting these patterns, I discuss three potential sources of materials price variation: geography, di¤erences in suppliers. marginal costs, and suppliers. price discriminatory behavior. Together, these variables account for 13% of the dispersion of materials prices. Finally, I demonstrate that plants.marginal costs are correlated with the marginal costs of their intermediate input suppliers.

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File URL: http://www2.census.gov/ces/wp/2012/CES-WP-12-11.pdf
File Function: First version, 2012
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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 12-11.

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Length: 72 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:cen:wpaper:12-11
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