Persistent Productivity Differences Between Firms

Katsuya Takii

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: We construct a dynamic assignment model that explains persistent productivity differences between firms. Large expected organization capital (firm-specific knowledge) attracts skilled workers, who help to accumulate organization capital. Accumulated large organization capital leads to good performances, which, in turn, confirm high expectations. It is shown that the sluggish movement of expected productivity that occurs through this positive feedback can play a role similar to an unobserved fixed effect in the productivity dynamics. Our calibration exercises suggest that the proposed feedback accompanied by amplification mechanisms inherent in the assignment model can explain a major part of the observed persistence and disparity in productivity.

Pages: 66 pages
Date: 2011-04
New Economics Papers: this item is included in nep-bec and nep-hrm
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Citations: View citations in EconPapers (2)

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Working Paper: Persistent Productivity Differences Between Firms (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:11048

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