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Products and productivity

Bernard, Andrew B. and Redding, Stephen and Schott, Peter K. (2005) Products and productivity. 699. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: 699

Abstract

Firms' decisions about which goods to produce are often made at a more disaggregate level than the data observed by empirical researchers. When products differ according to production technique or the way in which they enter demand, this data aggregation problem introduces a bias into standard measures of firm productivity. We develop a theoretical model of heterogeneous firms endogenously self-selecting into heterogeneous products. We characterize the bias introduced by unobserved variation in product mix across firms, and the implications of this bias for identifying firm and industry responses to exogenous policy shocks such as deregulation. More generally, we demonstrate that product switching gives rise to a richer set of industry-level dynamics than models where firm product mix remains fixed.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2005 A. B. Bernard, S. Redding and P. K. Schott
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HD Industries. Land use. Labor
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Date Deposited: 03 Mar 2008
Last Modified: 01 Oct 2010 08:50
URI: http://eprints.lse.ac.uk/id/eprint/3692

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