An Augmented Static Olley-Pakes Productivity Decomposition with Entry and Exit: Measurement and Interpretation

Mika Maliranta, Niku Määttänen

Research output: Contribution to journalArticleScientificpeer-review

7 Citations (Scopus)

Abstract

We develop an augmented Olley-Pakes (OP) decomposition that allows us to examine how entering and exiting firms contribute to the popular OP covariance measure of allocative efficiency. Applying the decomposition to a comprehensive micro-level data, we find that a large part of the OP covariance component can be attributed to entrants and exiting firms. We also build a model of firm dynamics that is consistent with our main empirical results. In the model economy, the standard OP covariance component tends to increase with certain type of distortions because of endogenous changes in firm entry and exit.

Original languageEnglish
Pages (from-to)1372-1416
Number of pages45
JournalECONOMICA
Volume82
DOIs
Publication statusPublished - 1 Dec 2015
MoE publication typeA1 Journal article-refereed

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