Aggregate Productivity Growth: Lessons from Microeconomic Evidence

85 Pages Posted: 7 Apr 1999 Last revised: 11 Oct 2010

See all articles by Lucia Foster

Lucia Foster

U.S. Census Bureau - Center for Economic Studies

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

C.J. Krizan

Banco de España

Date Written: November 1998

Abstract

In this paper, we exploit establishment-level data to examine the relationship between microeconomic productivity dynamics and aggregate productivity growth. After synthesizing the evidence from recent studies, we conduct our own analysis using establishment-level data for U.S. manufacturing establishments as well for selected service industries. The use of longitudinal micro data on service sector establishments is one of the novel features of our analysis. Our main findings are summarized as follows: (i) the contribution of reallocation of outputs and inputs from less productive to more productive establishments plays a significant role in accounting for aggregate productivity growth; (ii) for the selected service industries considered, the contribution of net entry (more productive entering establishments displacing less productive exiting establishments) is dominant; (iii) the contribution of net entry to aggregate productivity growth is disproportionate and is increasing in the horizon over which the changes are measured since longer horizon yields greater differentials from selection and learning effects; (iv) the contribution of reallocation to aggregate productivity growth varies over time (e.g. is cyclically sensitive) and industries and is somewhat sensitive to subtle differences in measurement and decomposition methodologies.

Suggested Citation

Foster, Lucia and Haltiwanger, John C. and Krizan, C.J., Aggregate Productivity Growth: Lessons from Microeconomic Evidence (November 1998). NBER Working Paper No. w6803. Available at SSRN: https://ssrn.com/abstract=140599

Lucia Foster

U.S. Census Bureau - Center for Economic Studies ( email )

4700 Silver Hill Road
Washington, DC 20233
United States

John C. Haltiwanger (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

C.J. Krizan

Banco de España ( email )

Madrid 28014
Spain

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