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

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Fox, Jeremy T

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w16853.Publication details: Cambridge, Mass. National Bureau of Economic Research 2011.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: 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.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w16853 (Browse shelf(Opens below))	Not For Loan

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March 2011.

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.