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Unraveling firms: Demand, productivity and markups heterogeneity

Author

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  • Emanuele Forlani

    (Department of Economics and Management, University of Pavia, Pavia, Italy, also affiliated with the Centro Studi Luca d'Agliano.)

  • Ralf Martin

    (Imperial College Business School, Imperial College, London, UK,also affiliated with the Centre for Economic Performance (CEP) – London School of Economics and Political Science and the Grantham Institute.)

  • Giordano Mion

    (Department of Economics, University of Sussex, Falmer, UK, also affiliated with the CEP, CEPR and CESifo.)

  • Mirabelle Muûls

    (Imperial College Business School and Grantham Institute, Imperial College, London, UK, also affliated with the CEP.)

Abstract

We develop a new econometric framework that simultaneously allows recovering heterogeneity in demand, TFP and markups across firms while leaving the correlation among the three unrestricted. We do this by systematically exploiting assumptions that are implicit in previous firm-level productivity estimation approaches. We use Belgian firms production data to quantify TFP, demand and markups and show how they are correlated among them, across time and with measures obtained from other approaches. We also show to what extent our three dimensions of heterogeneity allow us to gain deeper and sharper insights on two key firm-level outcomes: export status and size.

Suggested Citation

  • Emanuele Forlani & Ralf Martin & Giordano Mion & Mirabelle Muûls, 2016. "Unraveling firms: Demand, productivity and markups heterogeneity," Working Paper Research 293, National Bank of Belgium.
  • Handle: RePEc:nbb:reswpp:201602-293
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    References listed on IDEAS

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    More about this item

    Keywords

    Demand; Productivity; Markups; Production function estimation; Export status; Firm size;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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