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Decomposing differences in total factor productivity across firm size

Laia Castany (), Enrique Lopez-Bazo () and Rosina Moreno ()
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Laia Castany: Grup de Recerca d'Anàlisi Quantitativa Regional (AQR), Institut de Recerca en Economia Aplicada (IREA), Universitat de Barcelona

No XREAP2007-01, Working Papers from Xarxa de Referència en Economia Aplicada (XREAP)

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)
JEL-codes: D24 J24 L25 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2007-03, Revised 2007-03
New Economics Papers: this item is included in nep-bec, nep-eff and nep-ent
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Citations: View citations in EconPapers (15) Track citations by RSS feed

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http://www.xreap.cat/RePEc/xrp/pdf/XREAP2007-01.pdf First version, 2007 (application/pdf)
http://www.xreap.cat/RePEc/xrp/pdf/XREAP2007-01.pdf Revised version, 2007 (application/pdf)

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