Measured Productivity with Endogenous Markups and Economic Profits

Anthony Savagar

No 2110, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: I study the effect of dynamic firm entry, scale economies and oligopolistic competition on measured productivity and output amplification. These features cause measured productivity (Solow residual) to exceed pure technology. I decompose measured productivity into pure technology and an endogenous component that is caused by firm-level output variation interacting with increasing returns to scale. In turn, I show that firm-level output variation depends on economic profits and markups that vary in response to dynamic entry and oligopolistic competition. I estimate the pure technology series adjusted for profits and markups and show that it is less volatile and more persistent than a benchmark model, whilst still generating output amplification.

Keywords: Markups; Firm Entry; Productivity; Scale Economies; Oligopolistic Competition (search for similar items in EconPapers)
JEL-codes: C62 D21 D43 E32 L13 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2021-03
New Economics Papers: this item is included in nep-bec and nep-eff
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Measured productivity with endogenous markups and economic profits (2021)
Working Paper: Measured Productivity with Endogenous Markups and Economic Profits (2019)
Working Paper: Measured Productivity with Endogenous Markups and Economic Profits (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:2110

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