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The Effects of Product Dropping on Firm's Productivity and Employment Composition

  • Sergio De Nardis

    (ISAE - Institute for Studies and Economic Analyses)

  • Marco Ventura


    (ISAE - Institute for Studies and Economic Analyses)

Recent literature on heterogeneous multi-product firms predicts that elimination of marginal (less productive) products, due to fiercer competition, leads to an increase of firm efficiency. We test this prediction in the case of a sample of Italian firms during a period (2000-05) of rising competitive pressures. Adopting a propensity score matching estimator, we find evidence of a causal relationship between product dropping and higher firm productivity. We also find evidence that product dropping activity causes a fall of the share of blue collars versus white collars. We draw some policy implications regarding labour market adjustment and support to internal product switching when competition shocks take place.

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Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 127.

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Length: 19 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:isa:wpaper:127
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  1. Thierry Mayer & Marc Melitz & Gianmarco Ottaviano, 2011. "Market Size, Competition, and the Product Mix of Exporters," Working Papers 2011-11, CEPII research center.
  2. Florin Bilbiie & Fabio Ghironi & Marc J. Melitz, 2007. "Endogenous Entry, Product Variety, and Business Cycles," NBER Working Papers 13646, National Bureau of Economic Research, Inc.
  3. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
  4. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2006. "Multi-Product Firms and Product Switching," NBER Working Papers 12293, National Bureau of Economic Research, Inc.
  5. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2005. "Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods," Working Paper Series WP05-10, Peterson Institute for International Economics.
  6. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
  7. repec:tpr:qjecon:v:123:y:2008:i:2:p:489-530 is not listed on IDEAS
  8. Christian Broda & David E. Weinstein, 2007. "Product Creation and Destruction: Evidence and Price Implications," NBER Working Papers 13041, National Bureau of Economic Research, Inc.
  9. Matteo Bugamelli & Fabiano Schivardi & Roberta Zizza, 2009. "The euro and firm restructuring," Temi di discussione (Economic working papers) 716, Bank of Italy, Economic Research and International Relations Area.
  10. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, June.
  11. Sergio de Nardis & Carmine Pappalardo, 2009. "Export, Productivity and Product Switching: The Case of Italian Manufacturing Firms," ISAE Working Papers 110, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  12. Verhoogen, Eric, 2007. "Trade, Quality Upgrading and Wage Inequality in the Mexican Manufacturing Sector," IZA Discussion Papers 2913, Institute for the Study of Labor (IZA).
  13. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2006. "Multi-product firms and trade liberalization," LSE Research Online Documents on Economics 3684, London School of Economics and Political Science, LSE Library.
  14. Angrist, Joshua D, 1990. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records," American Economic Review, American Economic Association, vol. 80(3), pages 313-36, June.
  15. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," CESifo Working Paper Series 3309, CESifo Group Munich.
  16. James J. Heckman, 1977. "Dummy Endogenous Variables in a Simultaneous Equation System," NBER Working Papers 0177, National Bureau of Economic Research, Inc.
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