Productivity Dispersion and Plant Selection in the Ready-Mix Concrete Industry
Allan Collard-Wexler ()
No 105, 2010 Meeting Papers from Society for Economic Dynamics
Plant level productivity in the ready-mix concrete sector is highly dispersed, whereby a plant in the 90th percentile of the distribution produces twice the value added than a plant in the 10th percentile. Is the magnitude of this dispersion real or simply an artifact of mea- surement error? Moreover, why don’t inefficient producers exit the industry? Using a dynamic model of entry and exit, I find that a plant in the highest quintile of productivity has profits are $ 220 000 higher than those in the lowest quintile of productivity, i.e. a plant in the top quintile produces 1.5 times more value added than a plant in the bottom quintile of productivity, when both plants use the same inputs. Exit of inefficient producers is slowed by two factors. First, sunk costs are quite large in the ready-mix concrete industry, so a firm will remain in the industry even when it is currently making sub- stantial losses. Second, plant productivity is very volatile, so current productivity is a weak signal of future profitability.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Working Paper: Productivity Dispersion and Plant Selection in the Ready-Mix Concrete Industry (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:red:sed010:105
Access Statistics for this paper
More papers in 2010 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().