Productivity dispersion, competition and productivity measurement
By: Ralf Martin.
Contributors: Martin, Ralf.; London School of Economics and Political Science. Centre for Economic Performance.
Series: CEP discussion paper -- no. 692
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Published: 2008
Place of publication: London
Language: eng
Format: Electronic resource
Description: A startling fact of firm level productivity analysis is the large and persistent differences in both labour productivity and total factor productivity (TFP) between firms in narrowly defined sectoral classes. The competitiveness of an industry is potentially an important factor explaining this productivity dispersion. The degree of competition has also implications for the measurement of TFP at the firm level. This paper firstly develops a novel control function approach to production function and TFP estimation explicitly taking imperfect competition into account. This addresses a number of issues with the control function approach to productivity estimation. Secondly, applying this new approach to UK data it shows that productivity dispersion on average is about 50 percent higher than with standard TFP measures. It also shows that accounting for imperfect competition matters for estimates of the persistence of TFP. Thirdly, the paper finds a negative relationship between competition and productivity dispersion.
Notes: Title from PDF file (viewed on Oct. 10, 2008).

"May 2008."

Includes bibliographical references.

Also available in print.

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Mode of access: World Wide Web.