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Differences In Total Factor Productivity Across Firm Size - A Distributional Analysis

Author

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  • Laia Castany

    ()

  • Enrique López-Bazo

    ()

  • Rosina Moreno

    ()

Abstract

Productivity has been considered a key element for firms and economies to be more competitive. Several studies on productivity at a microeconomic level have found notable heterogeneity between firms. More concretely, differences in Total Factor Productivity (TFP) between large and small firms have been observed. Those differences might be caused by differences in the distribution of the factors determining the level of TFP across firmsÂ’ size, and by differences in the return to such factors. To assess to what extent the observed differences in TFP between large and small Spanish manufacturing firms are caused by the above-mentioned reasons we propose a methodology that, built on the traditional Oaxaca-Blinder decomposition, focuses the attention on the entire distribution of productivity. The TFP index used in our paper guarantees comparison of the level of productivity across firms in a given year and over time, and has been computed using the information in the Encuesta sobre Estrategias Empresariales (ESEE), a comprehensive survey of manufacturing firms in Spain from 1990 to 1999. Results confirm that the distribution of TFP in the large firms dominates that for the small firms, and how besides differences in the distribution of, for example, human capital and R&D expenditures across firmsÂ’ size, heterogeneity in returns between large and small firms play a major role in explaining differences in the distribution of TFP. Important policy issue are derived in connection with the possibility of increasing the aggregate productivity of the Spanish economy considering that the average firm size in Spain is smaller than in other European countries.

Suggested Citation

  • Laia Castany & Enrique López-Bazo & Rosina Moreno, 2005. "Differences In Total Factor Productivity Across Firm Size - A Distributional Analysis," ERSA conference papers ersa05p115, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa05p115
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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa05/papers/115.pdf
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    References listed on IDEAS

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    Cited by:

    1. C. Praag & Peter Versloot, 2007. "What is the value of entrepreneurship? A review of recent research," Small Business Economics, Springer, vol. 29(4), pages 351-382, December.
    2. Veland Ramadani & Hyrije Abazi-Alili & Léo-Paul Dana & Gadaf Rexhepi & Sadudin Ibraimi, 2017. "The impact of knowledge spillovers and innovation on firm-performance: findings from the Balkans countries," International Entrepreneurship and Management Journal, Springer, vol. 13(1), pages 299-325, March.
    3. Daniel Gonçalves & Ana Martins, 2016. "The Determinants of TFP Growth in the Portuguese Manufacturing Sector," GEE Papers 0062, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Nov 2016.
    4. Massón-Guerra, José Luis & Ortín-Angel, Pedro, 2014. "Entrepreneurship Capital and Regional Productivity Revisited," MPRA Paper 57470, University Library of Munich, Germany.

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