Identifying Productivity When It Is a Factor of Production
47 Pages Posted: 13 Nov 2017 Last revised: 2 Sep 2019
Date Written: August 30, 2019
Economists typically model a plant's productivity as an exogenous characteristic, but the people who run and work at manufacturing plants make choices, at a cost, that affect plant productivity. I develop a method to partially identify the productivity distribution when such choices determine productivity. The method uses a monotone comparative static result I prove in a general economic model. It does not require instruments or timing assumptions. I use the method to study the effect of implementing market-based pricing on productivity in the electricity generation industry.
Keywords: Productivity, Partial Identification, Technology Choice, Identification of Production Functions, Power Plants, Restructuring
JEL Classification: D24, L11, L94
Suggested Citation: Suggested Citation