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Idiosyncratic Productivity Shocks and Plant-Level Heterogeneity

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  • Raphael Bergoeing
  • Andrés Hernando
  • Andrea Repetto

Abstract

Using plant-level data on Chilean manufacturing firms for the 1980-99 period, we estimate and characterize disaggregate total factor productivity. We show that idiosyncratic productivity shocks are a quantitatively relevant source of the observed heterogeneity in the behavior of plants. Both exit and input demand decisions are correlated with our estimates of plant level productivity. We then use these estimates to study the microeconomic sources of aggregate growth. We decompose productivity dynamics into production reallocation and within plant efficiency changes. We find that both sources of productivity growth have significantly contributed to efficiency gains in Chile during the last two decades. Although reallocation effects are always positive, the magnitude of their contribution is larger during periods of negative or low growth. Within-plant productivity growth contributes positively only during the 1990s, consistently with the existence of a lag between the implementation of major market oriented structural reforms -- mostly undertaken during the late 1970s and early 1980s -- and their complete effect on the economy. Once reforms were consolidated, unbounded within-plants efficiency gains driven by technology adoption and innovation occurred.

Suggested Citation

  • Raphael Bergoeing & Andrés Hernando & Andrea Repetto, 2003. "Idiosyncratic Productivity Shocks and Plant-Level Heterogeneity," Documentos de Trabajo 173, Centro de Economía Aplicada, Universidad de Chile.
  • Handle: RePEc:edj:ceauch:173
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    References listed on IDEAS

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    Cited by:

    1. Roberto Álvarez & Rodrigo Fuentes, 2004. "Patterns of Specialization and Economic Growth in Chile by Sector," Working Papers Central Bank of Chile 288, Central Bank of Chile.
    2. José Miguel Benavente & Cintia Külzer, 2008. "Creación y destrucción de empresas en Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 35(2 Year 20), pages 195-214, December.
    3. Amit Gandhi & Salvador Navarro & David Rivers, 2011. "On the Identification of Production Functions: How Heterogeneous is Productivity?," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20119, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    4. Ezra Oberfield, 2011. "Productivity and Misallocation During a Crisis," 2011 Meeting Papers 1328, Society for Economic Dynamics.
    5. Şeker, Murat, 2012. "A structural model of firm and industry evolution: Evidence from Chile," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 891-913.
    6. Rosario Aldunate, 2021. "Financial Constraints: a Propagation Mechanism of Foreign Shocks," Working Papers Central Bank of Chile 897, Central Bank of Chile.
    7. Ezra Oberfield, 2013. "Productivity and Misallocation During a Crisis: Evidence from the Chilean Crisis of 1982," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 100-119, January.
    8. Audra Bowlus & Yuet-Yee Linda Wong, 2020. "The Millenials' Transition from School-to-Work," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20201, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    9. Roberto Alvarez & Ricardo López, 2004. "Orientación Exportadora y Productividad en la Industria Manufacturera Chilena," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 41(124), pages 315-343.
    10. José Miguel Benavente & Christian Ferrada, 2004. "Probability of Survival of New Manufacturing Plants: the case of Chile," Econometric Society 2004 Latin American Meetings 305, Econometric Society.
    11. David Greenstreet, 2007. "Exploiting Sequential Learning to Estimate Establishment-Level Productivity Dynamics and Decision Rules," Economics Series Working Papers 345, University of Oxford, Department of Economics.
    12. Amit Gandhi & Salvador Navarro & David Rivers, 2017. "How Heterogeneous is Productivity? A Comparison of Gross Output and Value Added," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201727, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    13. Rodrigo A. Cerda & Diego Saravia, 2009. "Corporate Tax, Firm Destruction and Capital Stock Accumulation: Evidence From Chilean Plants, 1979-2004," Working Papers Central Bank of Chile 521, Central Bank of Chile.
    14. Raphael Bergoeing & Facundo Piguillem, 2003. "Innovaciones en productividad y dinámica de plantas," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 18(2), pages 3-32, December.
    15. Jaime Gatica & Pilar Romaguera, 2005. "El Mercado Laboral en Chile Nuevos Temas y Desafíos," Documentos de Trabajo 210, Centro de Economía Aplicada, Universidad de Chile.
    16. Váry, Miklós, 2021. "The long-run real effects of monetary shocks: Lessons from a hybrid post-Keynesian-DSGE-agent-based menu cost model," Economic Modelling, Elsevier, vol. 105(C).

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