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Firm productivity dynamics and distribution: Evidence for Chile using micro data from administrative tax records

Elías Albagli, Mario Canales, Claudia de la Huerta, Matias Tapia () and Juan Marcos Wlasiuk

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: Using administrative tax records for all formal Chilean firms, we compute and characterize the evolution and distribution of total factor productivity at the firm level. With data on labor, capital, and value-added, we compute TFPR measures for individual firms between 2006 and 2015, allowing for differences in factor intensities across economic sectors. Our results show that factor reallocation plays a relevant role in explaining the evolution of aggregate TFP in Chile over the last decade. Firms with higher TFPR hire more workers, have stronger capital growth, and have a larger probability of survival. However, the extent of reallocation does not prevent a large, persistent dispersion in TFPR among firms. The magnitude of this dispersion suggests that further reallocation could bring up first-order gains in aggregate productivity and output. Our results also suggest that misallocation comes mainly from distortions on the firms´ overall scale, rather than from distortions on the relative use of capital and labor.

Date: 2019-05
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