Unraveling Firms: Demand, Productivity and Markups Heterogeneity

55 Pages Posted: 9 Mar 2016

See all articles by Emanuele Forlani

Emanuele Forlani

University of Pavia

Ralf Martin

Imperial College London

Giordiano Mion

University of Sussex

Mirabelle Muûls

Imperial College Business School and Grantham Institute - Climate Change and the environment; London School of Economics - Centre for Economic Performance

Date Written: January 27, 2016

Abstract

We develop a new econometric framework that simultaneously allows recovering heterogeneity in demand, TFP and markups across firms while leaving the correlation among the three unrestricted. We do this by systematically exploiting assumptions that are implicit in previous firm-level productivity estimation approaches. We use Belgian firms production data to quantify TFP, demand and markups and show how they are correlated among them, across time and with measures obtained from other approaches. We also show to what extent our three dimensions of heterogeneity allow us to gain deeper and sharper insights on two key firm-level outcomes: export status and size.

Keywords: demand, productivity, markups, production function estimation, export status, firm size

JEL Classification: D24, L11, L25, F14

Suggested Citation

Forlani, Emanuele and Martin, Ralf and Mion, Giordiano and Muûls, Mirabelle, Unraveling Firms: Demand, Productivity and Markups Heterogeneity (January 27, 2016). CESifo Working Paper Series No. 5725, Available at SSRN: https://ssrn.com/abstract=2743139

Emanuele Forlani

University of Pavia ( email )

Corso Strada Nuova, 65
27100 Pavia, 27100
Italy

Ralf Martin

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Giordiano Mion (Contact Author)

University of Sussex ( email )

Mirabelle Muûls

Imperial College Business School and Grantham Institute - Climate Change and the environment ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

London School of Economics - Centre for Economic Performance ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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