Firm Heterogeneity and Endogenous Regional Disparities
LICOS Discussion Paper No. 161/2005
36 Pages Posted: 8 Feb 2006
Date Written: 2005
We exploit the census of Romanian firms to provide a microfounded analysis of the sources of regional disparities in the country. To this extent, we adapt to the regional case a decomposition of firm-level output dynamics based on semi-parametric productivity estimates. The methodology, robust to different techniques of TFP estimation, allows us to analyze the sources of regional disparities controlling for the heterogeneity in firms' characteristics. In particular, we measure various compositional effects of multinational enterprises (MNEs)on regional growth, finding that regional disparities are to a large extent endogenous to the interaction between firm-level dynamics and initial market conditions.
Keywords: regional convergence, multinational firms, productivity, transition economies
JEL Classification: F12, F23, L10, P20
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