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Decomposing differences in total factor productivity across firm size

  • Laia Castany

    ()

    (Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Universitat de Barcelona)

  • Enrique López-Bazo

    ()

    (Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Departament d'Econometria, Estadística i Economia Espanyola, Universitat de Barcelona)

  • Rosina Moreno

    ()

    (Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Departament d'Econometria, Estadística i Economia Espanyola, Universitat de Barcelona)

This paper investigates the extent to which the gap in total factor productivity between small and large firms is due to differences in the endowment of factors determining productivity and to the returns associated with these factors. We place particular emphasis on the contribution of differences in the propensity to innovate and in the use of skilled labor across firms of different size. Empirical evidence from a representative sample of Spanish manufacturing firms corroborates that both differences in endowments and returns to innovation and skilled labor significantly contribute to the productivity gap between small and large firms. In addition, it is observed that the contribution of innovation to this gap is caused only by differences in quantity, while differences in returns have no effect; in the case of human capital, however, most of the effect can be attributed to increasing differences in returns between small and large firms.

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File URL: http://www.pcb.ub.es/xreap/aplicacio/fitxers/XREAP2007-01.pdf
File Function: First version, 2007
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File URL: http://www.pcb.ub.es/xreap/aplicacio/fitxers/XREAP2007-01.pdf
File Function: Revised version, 2007
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Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2007-01.

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Length: 29 pages
Date of creation: Mar 2007
Date of revision: Mar 2007
Handle: RePEc:xrp:wpaper:xreap2007-01
Contact details of provider: Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
Phone: +34+934039653
Web page: http://www.pcb.ub.edu/xreap
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