Computing the true spread
By: Ralf Martin.
Contributors: London School of Economics and Political Science. Centre for Economic Performance.
Series: CEP discussion paper ;; no. 692; Discussion paper (London School of Economics and Political Science. Centre for Economic Performance : Online) ;; no. 692.
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Published: 2005
Place of publication: London
Language: eng
Format: Electronic resource
Description: How much of the observed labour productivity spread is real? This paper proposes a novel framework to calculate productivity differences between plants accounting for imperfect competition, variations in output prices across plants, endogeneity of factor inputs and measurement error in labour inputs. For UK manufacturing as a whole I find that on average 59 percent of the labour productivity spread is explained by a combination of technical efficiency variations and differences in consumer valuations. Measurement error accounts on average for 9 percent of labour productivity spreads. The paper argues that standard TFP calculations lead to a systematic under-estimation of welfare relevant differences across businesses.
Notes: Includes bibliographical references.
Title from PDF file (viewed on June 22, 2005).
"May 2005."
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