Unraveling Firms: Demand, Productivity and Markups Heterogeneity

Giordano Mion, Ralf Martin, Emanuele Forlani () and Mirabelle Muûls ()

No 11058, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a novel econometric framework that simultaneously allows recovering heterogeneity in demand, quantity TFP and markups across firms while leaving the correlation among the three unrestricted. We accomplish this by explicitly introducing demand heterogeneity and by systematically exploiting assumptions used in previous productivity estimation approaches. In doing so, we provide an exact decomposition of revenue productivity in terms of the underlying heterogeneities thus bridging the gap between quantity and revenue productivity estimations. We use Belgian firms production data to quantify TFP, demand and markups and show how they are correlated with each other, across time and with measures obtained from other approaches. We also show how and to what extent our three dimensions of heterogeneity provide deeper and sharper insights on two questions: firm response to increasing import competition from China and the productivity advantage of importers.

Keywords: Import competition; China; Import status; Demand; Markups; Production function estimation; Productivity (search for similar items in EconPapers)
JEL-codes: D24 F14 L11 L25 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-bec, nep-ecm and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Related works:
Journal Article: Unraveling Firms: Demand, Productivity and Markups Heterogeneity (2023)
Working Paper: Unraveling firms: demand, productivity and markups heterogeneity (2016)
Working Paper: Unraveling Firms: Demand, Productivity and Markups Heterogeneity (2016)
Working Paper: Unraveling firms: demand, productivity and markups heterogeneity (2016)
Working Paper: Unraveling firms: Demand, productivity and markups heterogeneity (2016)
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