Products and Productivity

Andrew Bernard, Stephen Redding and Peter Schott

No 5126, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Product choice; Productivity; Deregulation; Industry evolution (search for similar items in EconPapers)
JEL-codes: D21 L11 L60 (search for similar items in EconPapers)
Date: 2005-07
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Products and Productivity (2009)
Working Paper: Products and Productivity (2008)
Working Paper: Products and Productivity (2005)
Working Paper: Products and productivity (2005)
Working Paper: Products and Productivity (2005)
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