Why is Productivity Correlated with Competition?

Matthew Backus

No 726, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: The positive correlation between average establishment-level productivity and measures of competitiveness is oft-observed but still controversial, despite its implications for competition policy and its centrality in the debate over the origins of the productivity effect of trade liberalization. This paper considers two competing explanations for the existence of the correlation: a causal relationship between competition and productivity, historically known as "X-inefficiency", and a market-level dynamic selection story that has gained ground in the trade literature. This paper demonstrates that the two effects are econometrically separable. Two empirical approaches are developed: a regression of quantiles and a selection correction procedure derived from a model of Markov-perfect industry dynamics. Both methods are applied to the ready- mix concrete industry, and results suggest that the correlation is almost exclusively attributable to X-inefficiency.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (7)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Why is Productivity Correlated with Competition? (2019)
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:red:sed014:726

Access Statistics for this paper

More papers in 2014 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 ().