Firm productivity differences from factor markets

Cheng, Wenya and Morrow, John (2018) Firm productivity differences from factor markets. Journal of Industrial Economics, 66 (1). pp. 126-171. ISSN 0022-1821

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Abstract

We model firm adaptation to local factor markets in which firms care about both the price and availability of inputs. The model is estimated by combining firm and population census data, and quantifies the role of factor markets in input use, productivity and welfare. Considering China's diverse factor markets, we find that within an industry interquartile labor costs vary by 30–80%, leading to 3–12% interquartile differences in TFP. In general equilibrium, homogenization of labor markets would increase real income by 1.33%. Favorably endowed regions attract more economic activity, providing new insights into within‐country comparative advantage and specialization.

Item Type:	Article
Official URL:	https://onlinelibrary.wiley.com/journal/14676451
Additional Information:	© 2018 The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HB Economic Theory
Date Deposited:	15 Jun 2018 11:19
Last Modified:	14 Sep 2024 20:42
URI:	http://eprints.lse.ac.uk/id/eprint/88357

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