Productivity dispersion, competition and productivity measurement

Ralf Martin

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: A startling fact of firm level productivity analysis is the large and persistent differences in both labour productivity and total factor productivity (TFP) between firms in narrowly defined sectoral classes. The competitiveness of an industry is potentially an important factor explaining this productivity dispersion. The degree of competition has also implications for the measurement of TFP at the firm level. This paper firstly develops a novel control function approach to production function and TFP estimation explicitly taking imperfect competition into account. This addresses a number of issues with the control function approach to productivity estimation. Secondly, applying this new approach to UK data it shows that productivity dispersion on average is about 50 percent higher than with standard TFP measures. It also shows that accounting for imperfect competition matters for estimates of the persistence of TFP. Thirdly, the paper finds a negative relationship between competition and productivity dispersion.

Keywords: Productivity Measurement; Imperfect Competition; Productivity Dispersion; Productivity Spread (search for similar items in EconPapers)
JEL-codes: C81 D24 L11 L25 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2008-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://eprints.lse.ac.uk/19573/ Open access version. (application/pdf)

Related works:
Working Paper: Productivity Dispersion, Competition and Productivity Measurement (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:19573

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().