Productivity, Welfare and Reallocation : Theory and Firm-Level Evidence
A considerable literature has focused on the determinants of total factor productivity (TFP), prompted by the empirical finding that TFP accounts for the bulk of long-term growth. This paper offers a deeper reason for such focus: the welfare of a r...
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| Format: | Policy Research Working Paper |
| Language: | English |
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2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100302082024 http://hdl.handle.net/10986/3713 |
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okr-10986-37132021-04-23T14:02:12Z Productivity, Welfare and Reallocation : Theory and Firm-Level Evidence Basu, Susanto Pascali, Luigi Schiantarelli, Fabio Serven, Luis AGGREGATE PRODUCTION FUNCTION ALLOCATIVE EFFICIENCY ARMA AVERAGE PRODUCTIVITY AVERAGE PRODUCTIVITY GROWTH BALANCE SHEET BALANCE SHEETS BASIC BENCHMARK BONDS BUSINESS CYCLES CAPITAL ACCUMULATION CAPITAL INCOME CAPITAL INPUT CAPITAL STOCK CHANGE IN TECHNOLOGY CLOSED ECONOMY COMMERCIAL BANKS COMPONENTS CONSTANT RATE CONSTANT RETURNS CONSTANT RETURNS TO SCALE CONSUMERS CONSUMPTION GOODS DEREGULATION DISCOUNTED VALUE DYNAMIC MODEL ECONOMETRICS ELASTICITY ELECTRICITY EMPLOYMENT EQUIPMENT ESP EXTERNALITIES FACTOR GROWTH FACTOR MARKETS FUTURE RESEARCH GDP GOVERNMENT EXPENDITURE GOVERNMENT EXPENDITURES GROSS OUTPUT GROWTH ACCOUNTING GROWTH RATE GROWTH RATES IMPERFECT COMPETITION IMPUTATION INCOME TAXES INCREASING RETURNS INCREASING RETURNS TO SCALE INDEX NUMBERS INDUSTRIAL STRUCTURE INDUSTRY PRODUCTIVITY INNOVATION INNOVATIONS INSURANCE INTERNATIONAL COMPARISON INVENTORY LABOR INPUT LABOR MARKET LABOR PRODUCTIVITY MACROECONOMIC GROWTH MACROECONOMICS MANPOWER MANUFACTURING MANUFACTURING INDUSTRIES MANUFACTURING INDUSTRY MARGINAL COSTS MARGINAL PRODUCT MARGINAL PRODUCTS MARKET IMPERFECTIONS MARKET PRICE MARKUP NATIONAL INCOME NDP OPPORTUNITY COST OPTIMIZATION OWNERSHIP STRUCTURE PC PERFECT COMPETITION PRICE TAKERS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITIES PRODUCTIVITY PRODUCTIVITY CHANGE PRODUCTIVITY GROWTH REAL GDP REAL INTEREST RATE RESULT RESULTS RETAIL TRADE STOCK PRICES TAXATION TECHNICAL CHANGE TECHNICAL PROGRESS TECHNOLOGICAL CHANGE TECHNOLOGICAL PROGRESS TELECOMMUNICATIONS TELECOMMUNICATIONS EQUIPMENT TFP TIME PERIOD TIME PERIODS TOTAL EXPENDITURE TOTAL FACTOR PRODUCTIVITY USER USES UTILITY FUNCTION UTILITY VALUE VALUATION VALUE ADDED WEB A considerable literature has focused on the determinants of total factor productivity (TFP), prompted by the empirical finding that TFP accounts for the bulk of long-term growth. This paper offers a deeper reason for such focus: the welfare of a representative consumer is summarized by current and anticipated future Solow productivity residuals. The equivalence holds for any specification of technology and market structure, as long as the representative household maximizes utility while taking prices parametrically. This result justifies total factor productivity as the right summary measure of welfare, even in situations where it does not properly measure technology, and makes it possible to calculate the contributions of disaggregated units (industries or firms) to aggregate welfare using readily available data. Based on this finding, the authors compute firm and industry contributions to welfare for a set of European countries (Belgium, France, Great Britain, Italy, Spain) using industry-level and firm-level data. With additional assumptions about technology and market structure (specifically, that firms minimize costs and face common factor prices), the authors show that welfare change can be further decomposed into three components that reflect, respectively, technical change, aggregate distortions, and allocative efficiency. Then, using the appropriate firm-level data, they assess the importance of each of these components as sources of welfare improvement in the same set of European countries. 2012-03-19T18:38:23Z 2012-03-19T18:38:23Z 2010-03-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100302082024 http://hdl.handle.net/10986/3713 English Policy Research Working Paper ; No. 5226 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
AGGREGATE PRODUCTION FUNCTION ALLOCATIVE EFFICIENCY ARMA AVERAGE PRODUCTIVITY AVERAGE PRODUCTIVITY GROWTH BALANCE SHEET BALANCE SHEETS BASIC BENCHMARK BONDS BUSINESS CYCLES CAPITAL ACCUMULATION CAPITAL INCOME CAPITAL INPUT CAPITAL STOCK CHANGE IN TECHNOLOGY CLOSED ECONOMY COMMERCIAL BANKS COMPONENTS CONSTANT RATE CONSTANT RETURNS CONSTANT RETURNS TO SCALE CONSUMERS CONSUMPTION GOODS DEREGULATION DISCOUNTED VALUE DYNAMIC MODEL ECONOMETRICS ELASTICITY ELECTRICITY EMPLOYMENT EQUIPMENT ESP EXTERNALITIES FACTOR GROWTH FACTOR MARKETS FUTURE RESEARCH GDP GOVERNMENT EXPENDITURE GOVERNMENT EXPENDITURES GROSS OUTPUT GROWTH ACCOUNTING GROWTH RATE GROWTH RATES IMPERFECT COMPETITION IMPUTATION INCOME TAXES INCREASING RETURNS INCREASING RETURNS TO SCALE INDEX NUMBERS INDUSTRIAL STRUCTURE INDUSTRY PRODUCTIVITY INNOVATION INNOVATIONS INSURANCE INTERNATIONAL COMPARISON INVENTORY LABOR INPUT LABOR MARKET LABOR PRODUCTIVITY MACROECONOMIC GROWTH MACROECONOMICS MANPOWER MANUFACTURING MANUFACTURING INDUSTRIES MANUFACTURING INDUSTRY MARGINAL COSTS MARGINAL PRODUCT MARGINAL PRODUCTS MARKET IMPERFECTIONS MARKET PRICE MARKUP NATIONAL INCOME NDP OPPORTUNITY COST OPTIMIZATION OWNERSHIP STRUCTURE PC PERFECT COMPETITION PRICE TAKERS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITIES PRODUCTIVITY PRODUCTIVITY CHANGE PRODUCTIVITY GROWTH REAL GDP REAL INTEREST RATE RESULT RESULTS RETAIL TRADE STOCK PRICES TAXATION TECHNICAL CHANGE TECHNICAL PROGRESS TECHNOLOGICAL CHANGE TECHNOLOGICAL PROGRESS TELECOMMUNICATIONS TELECOMMUNICATIONS EQUIPMENT TFP TIME PERIOD TIME PERIODS TOTAL EXPENDITURE TOTAL FACTOR PRODUCTIVITY USER USES UTILITY FUNCTION UTILITY VALUE VALUATION VALUE ADDED WEB |
| spellingShingle |
AGGREGATE PRODUCTION FUNCTION ALLOCATIVE EFFICIENCY ARMA AVERAGE PRODUCTIVITY AVERAGE PRODUCTIVITY GROWTH BALANCE SHEET BALANCE SHEETS BASIC BENCHMARK BONDS BUSINESS CYCLES CAPITAL ACCUMULATION CAPITAL INCOME CAPITAL INPUT CAPITAL STOCK CHANGE IN TECHNOLOGY CLOSED ECONOMY COMMERCIAL BANKS COMPONENTS CONSTANT RATE CONSTANT RETURNS CONSTANT RETURNS TO SCALE CONSUMERS CONSUMPTION GOODS DEREGULATION DISCOUNTED VALUE DYNAMIC MODEL ECONOMETRICS ELASTICITY ELECTRICITY EMPLOYMENT EQUIPMENT ESP EXTERNALITIES FACTOR GROWTH FACTOR MARKETS FUTURE RESEARCH GDP GOVERNMENT EXPENDITURE GOVERNMENT EXPENDITURES GROSS OUTPUT GROWTH ACCOUNTING GROWTH RATE GROWTH RATES IMPERFECT COMPETITION IMPUTATION INCOME TAXES INCREASING RETURNS INCREASING RETURNS TO SCALE INDEX NUMBERS INDUSTRIAL STRUCTURE INDUSTRY PRODUCTIVITY INNOVATION INNOVATIONS INSURANCE INTERNATIONAL COMPARISON INVENTORY LABOR INPUT LABOR MARKET LABOR PRODUCTIVITY MACROECONOMIC GROWTH MACROECONOMICS MANPOWER MANUFACTURING MANUFACTURING INDUSTRIES MANUFACTURING INDUSTRY MARGINAL COSTS MARGINAL PRODUCT MARGINAL PRODUCTS MARKET IMPERFECTIONS MARKET PRICE MARKUP NATIONAL INCOME NDP OPPORTUNITY COST OPTIMIZATION OWNERSHIP STRUCTURE PC PERFECT COMPETITION PRICE TAKERS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITIES PRODUCTIVITY PRODUCTIVITY CHANGE PRODUCTIVITY GROWTH REAL GDP REAL INTEREST RATE RESULT RESULTS RETAIL TRADE STOCK PRICES TAXATION TECHNICAL CHANGE TECHNICAL PROGRESS TECHNOLOGICAL CHANGE TECHNOLOGICAL PROGRESS TELECOMMUNICATIONS TELECOMMUNICATIONS EQUIPMENT TFP TIME PERIOD TIME PERIODS TOTAL EXPENDITURE TOTAL FACTOR PRODUCTIVITY USER USES UTILITY FUNCTION UTILITY VALUE VALUATION VALUE ADDED WEB Basu, Susanto Pascali, Luigi Schiantarelli, Fabio Serven, Luis Productivity, Welfare and Reallocation : Theory and Firm-Level Evidence |
| geographic_facet |
The World Region |
| relation |
Policy Research Working Paper ; No. 5226 |
| description |
A considerable literature has focused on
the determinants of total factor productivity (TFP),
prompted by the empirical finding that TFP accounts for the
bulk of long-term growth. This paper offers a deeper reason
for such focus: the welfare of a representative consumer is
summarized by current and anticipated future Solow
productivity residuals. The equivalence holds for any
specification of technology and market structure, as long as
the representative household maximizes utility while taking
prices parametrically. This result justifies total factor
productivity as the right summary measure of welfare, even
in situations where it does not properly measure technology,
and makes it possible to calculate the contributions of
disaggregated units (industries or firms) to aggregate
welfare using readily available data. Based on this finding,
the authors compute firm and industry contributions to
welfare for a set of European countries (Belgium, France,
Great Britain, Italy, Spain) using industry-level and
firm-level data. With additional assumptions about
technology and market structure (specifically, that firms
minimize costs and face common factor prices), the authors
show that welfare change can be further decomposed into
three components that reflect, respectively, technical
change, aggregate distortions, and allocative efficiency.
Then, using the appropriate firm-level data, they assess the
importance of each of these components as sources of welfare
improvement in the same set of European countries. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Basu, Susanto Pascali, Luigi Schiantarelli, Fabio Serven, Luis |
| author_facet |
Basu, Susanto Pascali, Luigi Schiantarelli, Fabio Serven, Luis |
| author_sort |
Basu, Susanto |
| title |
Productivity, Welfare and
Reallocation : Theory and Firm-Level Evidence |
| title_short |
Productivity, Welfare and
Reallocation : Theory and Firm-Level Evidence |
| title_full |
Productivity, Welfare and
Reallocation : Theory and Firm-Level Evidence |
| title_fullStr |
Productivity, Welfare and
Reallocation : Theory and Firm-Level Evidence |
| title_full_unstemmed |
Productivity, Welfare and
Reallocation : Theory and Firm-Level Evidence |
| title_sort |
productivity, welfare and
reallocation : theory and firm-level evidence |
| publishDate |
2012 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100302082024 http://hdl.handle.net/10986/3713 |
| _version_ |
1764387950820327424 |