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What is the Relationship between Competition and Productivity

Author

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  • Berthold Herrendorf

    (Arizona State University)

  • Yan Bai

    (Arizona State University)

Abstract

We demonstrate the usefulness of our results by using them to shed light on the existing empirical evidence. In particular, we argue that the studies of Syverson (2004), Schmitz (2005), and Lagakos (2007) are examples of how differences in the market size affect productivity. Our results are consistent with the positive relationship between competition and productivity that these studies find. In contrast, the study of Aghion et al (2005) is an example of how differences in entry costs affect productivity. Our results are consistent with the inverted U shape relationship that this study finds.

Suggested Citation

  • Berthold Herrendorf & Yan Bai, 2009. "What is the Relationship between Competition and Productivity," 2009 Meeting Papers 1142, Society for Economic Dynamics.
  • Handle: RePEc:red:sed009:1142
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    File URL: https://economicdynamics.org/meetpapers/2009/paper_1142.pdf
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    1. Klaus Desmet & Stephen L. Parente, 2010. "Bigger Is Better: Market Size, Demand Elasticity, And Innovation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 319-333, May.
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