Does Input Quality Drive Measured Differences in Firm Productivity? / Jeremy T. Fox, Valérie Smeets.

Format:

Book

Author/Creator:

Fox, Jeremy T.

Contributor:

National Bureau of Economic Research.

Smeets, Valérie.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16853.

NBER working paper series no. w16853

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

Firms in the same industry can differ in measured productivity by multiples of 3. Griliches (1957) suggests one explanation: the quality of inputs differs across firms. We add labor market history variables such as experience and firm and industry tenure, as well as general human capital measures such as schooling and sex. We also use the wage bill and worker fixed effects. We show adding human capital variables and the wage bill decreases the ratio of the 90th to 10th productivity quantiles from 3.27 to 2.68 across eight Danish manufacturing and service industries. The productivity dispersion decrease is roughly of the same order of magnitude as some competitive effects found in the literature, but input quality measures do not explain most productivity dispersion, despite economically large production function coefficients. We find that the wage bill explains as much dispersion as human capital measures.

Notes:

Print version record

March 2011.