Cross-Country Differences in Productivity: The Role of Allocation and Selection

By Eric Bartelsman, John C. Haltiwanger, S. Scarpetta. Social Science Research Network, 2013

1,201 citations recorded by the source corpus.

This paper combines different strands of the productivity literature to investigate the effect of idiosyncratic (firm-level) policy distortions on aggregate outcomes. On the one hand, a growing body of empirical research has been relating cross-country differences in key economic outcomes, such as productivity or output per capita, to differences in policies and institutions that shape the business environment. On the other hand, a branch of empirical research has attempted to shed light on the determinants of productivity at the firm level and the evolution of the distribution of productivity across firms within each industry. In this paper, we exploit a rich source of data with harmonized statistics on firm level variation within industries for a number of countries. Our key empirical finding is that there is substantial variation in the within-industry covariance between size and productivity across countries, but this covariance varies significantly across countries and is affected by the presence of idiosyncratic distortions. We develop a model in which heterogeneous firms face adjustment frictions (overhead labor and quasi-fixed capital) and idiosyncratic distortions. We show that the model can be readily calibrated to match the observed cross-country patterns of the within-industry covariance between productivity and size and thus help to explain the observed differences in aggregate performance.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/0381919ecf198fe8049b867b5dd5a12610332581

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

Citations in the corpus

Labour Reallocation and Productivity Dynamics: Financial Causes, Real Consequences (2016, neutral): “4 Bartelsman et al. (2013) provides a study of the determinants of cross-country differences in productivity using the Olley and Pakes (1996) decomposition.”
Size-Dependent Regulations, Firm Size Distribution, and Reallocation (2012, neutral): “Hsieh and Klenow (2009), and Bartelsman, Haltiwanger, and Scarpetta (2009) presented empirical evidence consistent with higher misallocation in poorer countries with lower TFP. Closely related to our paper, Guner, Ventura, and Xu (2008) and García-Santana and Pijoan-Mas (2011) suggested that…”
Optimal Development Policies With Financial Frictions (2014, neutral): “These papers are part of a growing literature exploring the macroeconomic effects of micro distortions (Restuccia and Rogerson, 2008; Hsieh and Klenow, 2009; Bartelsman, Haltiwanger, and Scarpetta, 2013).”
Firm Size Distortions and the Productivity Distribution: Evidence from France (2013, neutral): “ if   ≤     3  ∗  ́1(1−) −1(1−)1(1−) if   ≤  ∞ (11)”
On the Measure of Distortions (2014, methodology): “(1)This would obviously not hold when with a fixed cost in terms of overhead labor, as used in [3].”
Why Do Firms in Developing Countries Have Low Productivity (2010, result): “This suggests that the results of Eric Bartelsman, John Haltiwanger and Stefano Scarpetta (2009) and Chang-Tai Hsieh and Peter Klenow (2009)—that productive firms in developing countries like India and China do not expand as rapidly—due to a mix of financial factors (particularly for smaller firms) ”
Information, Misallocation, and Aggregate Productivity (2016, background): “We bear a direct connection to recent studies on the aggregate implications of misallocated resources, for example, Hsieh and Klenow (2009), Restuccia and Rogerson (2008), and Bartelsman et al. (2013).”
Measuring Total Factor Productivity at the Firm Level using OECD-ORBIS (2013, methodology): “2A possible workaround to this problem is distributed microdata analysis, developed by Eric Bartelsman (see Bartelsman et al. (2005, 2009), among others) and has been also used by the studies in the OECD (Bartelsman et al., 2003 and more recently Biosca et al. (2012)).”
Productivity Losses from Financial Frictions: Can Self-Financing Undo Capital Misallocation? (2014, background): “Finally, I contribute to broader work on the macroeconomic effects of microdistortions (Restuccia and Rogerson 2008; Hsieh and Klenow 2009; Bartelsman, Haltiwanger, and Scarpetta 2013).”
Factor Market Distortions Across Time, Space and Sectors in China (2011, background): “and from (6), τ i ∝ P −1 i ωi ( PiYi Pi )−σ .”