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Are Apparent Productive Spillovers a Figment of Specification Error

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  • Basu, S.
  • Fernald, J.G.

Abstract

Using data on gross output for two-digit manufacturing industries, we find that an increase in the output of one manufacturing sector has little or no significant effect on the productivity of other sectors. Using value-added data, however, we confirm the results of previous studies which find that output spillovers instead appear large. We provide an explanation for these differences, showing why, with imperfect competition, the use of value-added data leads to a spurious finding of large apparent external effects.
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Suggested Citation

  • Basu, S. & Fernald, J.G., 1993. "Are Apparent Productive Spillovers a Figment of Specification Error," Papers 93-22, Michigan - Center for Research on Economic & Social Theory.
  • Handle: RePEc:fth:michet:93-22
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    References listed on IDEAS

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    More about this item

    Keywords

    production;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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