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Scalable versus Productive Technologies

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Abstract

CORRECT ORDER OF AUTHORS: Hubmer, Chan, Ozkan, Salgado, Hong. Are larger firms more productive, more scalable, or both? We use firm-level panel data from thirteen countries and employ a broad set of methods to estimate factor elasticities---capturing returns to scale (RTS)---and total factor productivity (TFP). We find substantial RTS heterogeneity within industries, with larger firms exhibiting higher RTS driven by greater intermediate input elasticities. TFP, by contrast, rises with firm size only up to the top decile before declining. Incorporating RTS heterogeneity into a standard model of entrepreneurship more than doubles the efficiency losses from financial frictions compared with a conventional calibration with only TFP differences.

Suggested Citation

  • Mons Chan & Guangbin Hong & Joachim Hubmer & Serdar Ozkan & Sergio Salgado, 2024. "Scalable versus Productive Technologies," Working Papers 2024-019, Federal Reserve Bank of St. Louis, revised 06 May 2025.
    • Handle: RePEc:fip:fedlwp:98702
    DOI: 10.20955/wp.2024.019
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    1. Joel M. David & Venky Venkateswaran, 2019. "The Sources of Capital Misallocation," American Economic Review, American Economic Association, vol. 109(7), pages 2531-2567, July.
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    4. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    5. Nezih Guner & Gustavo Ventura & Xu Yi, 2008. "Macroeconomic Implications of Size-Dependent Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 721-744, October.
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    Cited by:

    1. Jeremy Pearce & Liangjie Wu, 2025. "Market Concentration and Aggregate Productivity: The Role of Demand," Staff Reports 1159, Federal Reserve Bank of New York.
    2. Rafael Guntin & Federico Kochen, 2025. "The Origins of Top Firms," Working Papers wp2025_2516, CEMFI.

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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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