Measuring Productivity Dispersion
Tinbergen Institute Discussion Paper 2017-033/VI
40 Pages Posted: 20 Mar 2017
Date Written: March 20, 2017
Measuring the dispersion of productivity or efficiency across firms in a market or industry is rife with methodological issues. Nevertheless, the existence of considerable dispersion now is well documented and widely accepted. Less well understood are the economic features and mechanisms underlying the magnitude of dispersion and how dispersion varies over time or across markets. On the one hand, selection mechanisms in both output and input markets should favor the most productive units through resource reallocation, thereby reducing dispersion. On the other hand, innovation and technological uncertainty tend to increase dispersion. This chapter presents a guide to measurement of dispersion and provides empirical evidence from a selection of countries and industries using a variety of methodologies.
Keywords: Productivity, Firm-level data, dispersion, volatility
JEL Classification: D2, O3
Suggested Citation: Suggested Citation