Productivity, markups, and reallocation: Evidence from French manufacturing firms from 1994 to 2016

Enrico De Monte

No 24-002, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper investigates the evolution of aggregate productivity and markups among French manufacturing firms between 1994 and 2016, by focusing on the role of reallocation with respect to both aggregate measures. Firm-level productivity and markups are estimated based on a gross output translog production function using popular estimation methods. I find an aggregate productivity growth of about 34% over the whole period while aggregate markups are found to remain relatively stable. As a key finding the study shows that over time reallocation of sales shares affects differently aggregate productivity and markups: Before 2000 both aggregate productivity and markups are importantly driven by reallocation effects; Post-2000, instead, the contribution of reallocation to aggregate productivity becomes negligible, inducing a slowdown in aggregate productivity growth, while I measure persistent reallocation of sales shares from lower to higher markup firms. Policy relevant implications of these dynamics are discussed.

Keywords: productivity decomposition; production function estimation; business dynamism; market power; entry and exit (search for similar items in EconPapers)
JEL-codes: C13 D21 D24 L16 L60 O47 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-bec, nep-com, nep-eec, nep-eff, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:283014

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