Decomposing Aggregate Productivity

N. Aaron Pancost and Chen Yeh

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: In this note, we evaluate the sensitivity of commonly-used decompositions for aggregate productivity. Our analysis spans the universe of U.S. manufacturers from 1977 to 2012 and we find that, even holding the data and form of the production function fixed, results on aggregate productivity are extremely sensitive to how productivity at the firm level is measured. Even qualitative statements about the levels of aggregate productivity and the sign of the covariance between productivity and size are highly dependent on how production function parameters are estimated. Despite these difficulties, we uncover some consistent facts about productivity growth: (1) labor productivity is consistently higher and less error-prone than measures of multi-factor productivity; (2) most productivity growth comes from growth within firms, rather than from reallocation across firms; (3) what growth does come from reallocation appears to be driven by net entry, primarily from the exit of relatively less-productive firms.

Keywords: aggregate productivity; growth; misallocation; entry; exit (search for similar items in EconPapers)
JEL-codes: D24 E24 L60 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2022-07
New Economics Papers: this item is included in nep-bec, nep-eff and nep-tid
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Citations: View citations in EconPapers (1)

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https://www2.census.gov/ces/wp/2022/CES-WP-22-25.pdf First version, 2022 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:22-25

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