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External Economies at the Firm Level: Evidence from Swedish Manufacturing

  • Lindström, Tomas

    (Monetary Policy Department, Central Bank of Sweden)

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    Using the method of Caballero and Lyons (1990, 1992), I examine detailed Swedish manufacturing firm-level data on output and factor inputs from 1979 through 1994. Panel regressions show that an increase in aggregate output and inputs appears to raise individual firms’ production beyond private marginal returns, a result consistent with external economies. However, while considering potential specification difficulties, this paper shows that a model in which random shifts in technology drive the business cycle statistically outperforms the Caballero-Lyons model. This finding suggests that high-frequency random shifts in technology are more important for movements in firms’ productivity than are external economies.

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    Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 89.

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    Length: 35 pages
    Date of creation: 01 Aug 1999
    Date of revision:
    Handle: RePEc:hhs:rbnkwp:0089
    Contact details of provider: Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
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