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| Title | Computing the True Spread |
| Author | Ralf Martin |
| Year | 2005 |
| Abstract | How much of the observed labour productivity spread is real? This paper proposes a novel frameworkto calculate productivity differences between plants accounting for imperfect competition, variationsin output prices across plants, endogeneity of factor inputs and measurement error in labour inputs.For UK manufacturing as a whole I find that on average 59 percent of the labour productivity spreadis explained by a combination of technical efficiency variations and differences in consumervaluations. Measurement error accounts on average for 9 percent of labour productivity spreads. Thepaper argues that standard TFP calculations lead to a systematic under-estimation of welfare relevantdifferences across businesses. |
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Topic revision: r8 - 25 Feb 2009 - 17:47:40 - RalfMartin
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