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The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms in a Rapidly Changing Environment

  • Katsuya Takii

    (Osaka School of International Public Policy (OSIPP))

In this paper, we construct a dynamic assignment model that can provide a unified explanation of persistent differences in productivity, wages, skill mixes and profits between firms in a changing and uncertain environment. Large expected organization capital (firm-specific knowledge) attracts skilled workers, who help to accumulate organization capital. Accumulated large organization capital, in turn, confirms high expectations. This positive feedback brings about persistent differences in these variables in an uncertain environment. We estimate parameters and simulate the model. Our results show that a positive assignment mechanism accounts for a large part of the observed persistence; the difficulty of estimating organization capital plays only an auxiliary role.

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File URL: http://www.osipp.osaka-u.ac.jp/archives/DP/2008/DP2008E003.pdf
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Paper provided by Osaka School of International Public Policy, Osaka University in its series OSIPP Discussion Paper with number 08E003.

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Length: 50 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:osp:wpaper:08e003
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  1. Samaniego, Roberto M., 2006. "Organizational capital, technology adoption and the productivity slowdown," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1555-1569, October.
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  7. Takii, Katsuya, 2007. "The value of adaptability--Through the analysis of a firm's prediction ability," Journal of Economics and Business, Elsevier, vol. 59(2), pages 144-162.
  8. Katsuya Takii, 2007. "The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms," OSIPP Discussion Paper 07E002, Osaka School of International Public Policy, Osaka University.
  9. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
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  13. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January.
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  22. Julia I. Lane & John C. Haltiwanger & James Spletzer, 1999. "Productivity Differences across Employers: The Roles of Employer Size, Age, and Human Capital," American Economic Review, American Economic Association, vol. 89(2), pages 94-98, May.
  23. Sattinger, Michael, 1979. "Differential Rents and the Distribution of Earnings," Oxford Economic Papers, Oxford University Press, vol. 31(1), pages 60-71, March.
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  26. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
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