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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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