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How Heterogeneous is Productivity? A Comparison of Gross Output and Value Added

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Abstract

In this paper, we study the theoretical and empirical relationship between gross output and value-added models of production. Using plant-level data from Colombia and Chile, we find that estimates of a gross output production function imply fundamentally different patterns of productivity heterogeneity compared to a value-added specification. Our estimates suggest that the specification of the technology may be more important than controlling for the endogeneity of inputs. Insights derived under value added, compared to gross output, could lead to significantly different policy conclusions.

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  • Amit Gandhi & Salvador Navarro & David Rivers, 2017. "How Heterogeneous is Productivity? A Comparison of Gross Output and Value Added," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201727, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
  • Handle: RePEc:uwo:hcuwoc:201727
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    References listed on IDEAS

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    Cited by:

    1. Mertens, Matthias, 2019. "Micro-mechanisms behind declining labour shares: Market power, production processes, and global competition," IWH-CompNet Discussion Papers 3/2019, Halle Institute for Economic Research (IWH).

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