Productivity Convergence at the Firm Level

Abstract

Productivity convergence among countries has been investigated extensively with mixed results. This paper extends the analysis to the firm level to shed light on the debate of convergence or non-convergence. We find productivity convergence among firms widely in Japan, in both manufacturing industries and non-manufacturing ones. We obtain these results taking explicit account of exiting firms as a source of selection biases. The convergence rate is much faster among firms than countries. We also find that there are substantial differences among industries in the convergence speed. IT industries that heavily rely on technological progress show faster rates of convergence.

Keywords: Firm-level productivity, convergence, technology diffusion, selection bias

JEL Classification: D21, D24, O47, L11