Decomposing differences in total factor productivity across firm size

Laia Castany (), Enrique Lopez-Bazo and Rosina Moreno ()
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Laia Castany: Faculty of Economics, University of Barcelona

No 200705, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: This paper investigates the extent to which the gap in total factor productivity between small and large firms is due to differences in the endowment of factors determining productivity and to the returns associated with these factors. We place particular emphasis on the contribution of differences in the propensity to innovate and in the use of skilled labor across firms of different size. Empirical evidence from a representative sample of Spanish manufacturing firms corroborates that both differences in endowments and returns to innovation and skilled labor significantly contribute to the productivity gap between small and large firms. In addition, it is observed that the contribution of innovation to this gap is caused only by differences in quantity, while differences in returns have no effect; in the case of human capital, however, most of the effect can be attributed to increasing differences in returns between small and large firms.

Keywords: Total Factor Productivity; skilled labor; innovation; firm size; Oaxaca decomposition (search for similar items in EconPapers)
Pages: 25 pages
Date: 2007-03, Revised 2007-03
New Economics Papers: this item is included in nep-bec, nep-eff, nep-ent and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Working Paper: Decomposing differences in total factor productivity across firm size (2007)
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