Download this Paper Open PDF in Browser

Products and Productivity

45 Pages Posted: 17 Oct 2005 Last revised: 19 Aug 2010

Andrew B. Bernard

Tuck School of Business at Dartmouth; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Stephen J. Redding

Princeton University

Peter K. Schott

Yale University - School of Management; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Multiple version iconThere are 4 versions of this paper

Date Written: August 2005

Abstract

Firms' decisions about which goods to produce are often made at a more disaggregate level than the data observed by empirical researchers. When products differ according to production technique or the way in which they enter demand, this data aggregation problem introduces a bias into standard measures of firm productivity. We develop a theoretical model of heterogeneous firms endogenously self-selecting into heterogeneous products. We characterize the bias introduced by unobserved variation in product mix across firms, and the implications of this bias for identifying firm and industry responses to exogenous policy shocks such as deregulation. More generally, we demonstrate that product switching gives rise to a richer set of industry-level dynamics than models where firm product mix remains fixed.

Suggested Citation

Bernard, Andrew B. and Redding, Stephen J. and Schott, Peter K., Products and Productivity (August 2005). NBER Working Paper No. w11575. Available at SSRN: https://ssrn.com/abstract=788440

Andrew B. Bernard (Contact Author)

Tuck School of Business at Dartmouth ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-0302 (Phone)
603-646-9084 (Fax)

HOME PAGE: http://mba.tuck.dartmouth.edu/pages/faculty/Andrew.Bernard/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Stephen J. Redding

Princeton University ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~reddings/

Peter K. Schott

Yale University - School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-436-4260 (Phone)
203-436-6974 (Fax)

HOME PAGE: http://www.som.yale.edu/faculty/pks4

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Paper statistics

Downloads
39
Abstract Views
598