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The Size and Life-cycle Growth of Plants: The Role of Productivity, Demand and Wedges

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  • Marcela Eslava
  • John C. Haltiwanger

Abstract

We develop a framework that uses price and quantity information on both establishments' outputs and inputs to assess the roles, on establishment dynamics and welfare, of technical efficiency, input prices, demand/quality, idiosyncratic markups, and residual wedges. Our strategy nests previous approaches limited by data availability. In our application, demand/quality is found to dominate the cross sectional variability of sales and sales growth, while quality-adjusted input prices and residual wedges play dampening roles, especially at birth. Markups play only a modest role for cross-sectional variability of sales and sales growth but are important in explaining welfare losses from revenue productivity dispersion.

Suggested Citation

  • Marcela Eslava & John C. Haltiwanger, 2020. "The Size and Life-cycle Growth of Plants: The Role of Productivity, Demand and Wedges," NBER Working Papers 27184, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:27184
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    2. De Loecker, Jan, 2021. "Comment on (Un)pleasant ... by Bond et al (2020)," Journal of Monetary Economics, Elsevier, vol. 121(C), pages 15-18.
    3. Eero Mäkynen & Oskari Vähämaa, 2021. "Uncertainty, Misallocation and the Life-cycle Growth of Firms," Discussion Papers 146, Aboa Centre for Economics.
    4. Jörn Kleinert, 2021. "Organizational capital, technological choice, and firm productivity," Graz Economics Papers 2021-03, University of Graz, Department of Economics.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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