Productivity Dispersion and Plant Selection in the Ready-Mix Concrete Industry
58 Pages Posted: 2 Sep 2011
Date Written: August 1, 2011
Abstract
This paper presents a quantitative model of productivity dispersion to explain why inefficient producers are slowly selected out of the ready-mix concrete industry. Measured productivity dispersion between the 10th and 90th percentile falls from a 4 to 1 difference using OLS, to a 2 to 1 difference using a control function. Due to volatile productivity and high sunk entry costs, a dynamic oligopoly model shows that to rationalize small gaps in exit rates between high and low productivity plants, a plant in the top quintile must produce 1.5 times more than a plant in the bottom quintile.
JEL Classification: L13, L6, D24
Suggested Citation: Suggested Citation
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