Productivity spreads, market power spreads and trade

Much of recent Trade theory focuses on heterogeneity of firms and the differential impacttrade policy might have on firms with different levels of productivity. A common problem isthat most firm level dataset do not contain information on output prices of firms which makesit difficult to distinguish between productivity differences and differences in market powerbetween firms. This paper develops a new econometric framework that allows estimatingboth firm specific productivity and market power in a semi-parametric way based on acontrol function approach. The framework is applied to Chilean firm level data from the early1980, shortly after the country underwent wide ranging trade reforms. The finding is that inall sectors of the economy market power declined and productivity increased. In sectors withhigher import penetration productivity particularly at the bottom end of the distributionincreased faster. At the same time market power declined particularly so at the top end of themarket power distribution. We also show, that ignoring the effect on market power leads toan underestimation of the positive effects of increased import penetration on productivity

Globalisation, ICT and the Nitty Gritty of Plant Level Datasets

The net entry contribution to aggregate productivity growth has increased dramatically in the UK over 1990saccording to calculations based on data from the Annual Respondents Database (ARD). Some recent studieshave tried to link this to other structural changes over the same period such as increased globalisation and usageof ICT. I argue that the increase might equally have been caused by a systematic bias that is introduced togrowth decompositions through random survey sampling of the underlying plant or firm panel datasets. Thisbias - despite being a general problem of growth decompositions does not seem to have been noticed in theliterature yet. In the 1990s the Office for National Statistics (ONS) has successively increased the share of plantsin the population of the ARD that are subject to random sampling. I show that this could cause the bias tospuriously increase the net entry contribution. My results show that correcting for the bias makes a substantialdifference: the net entry contribution is about 10 percentage points lower on the corrected series in the 1990s.Surprisingly however, the positive correlation between ICT and net entry share - a main result of earlier studies- becomes more significant.Productivity Growth Decomposition, Micro Data, Random Sampling, Globalisation, ICT

Productivity Spreads, Market Power Spreads and Trade

Much of recent Trade theory focuses on heterogeneity of firms and the differential impact trade policy might have on firms with different levels of productivity. A common problem is that most firm level dataset do not contain information on output prices of firms which makes it difficult to distinguish between productivity differences and differences in market power between firms. This paper develops a new econometric framework that allows estimating both firm specific productivity and market power in a semi-parametric way based on a control function approach. The framework is applied to Chilean firm level data from the early 1980, shortly after the country underwent wide ranging trade reforms. The finding is that in all sectors of the economy market power declined and productivity increased. In sectors with higher import penetration productivity particularly at the bottom end of the distribution increased faster. At the same time market power declined particularly so at the top end of the market power distribution. We also show, that ignoring the effect on market power leads to an underestimation of the positive effects of increased import penetration on productivity.Trade policy, productivity measurement, imperfect competition, productivity dispersion, productivity spread

Why is the US so Energy Intensive? Evidence from US Multinationals in the UK

At present the USA is - in per capita terms - the top greenhouse gas polluter among the world's major economies. This is mirrored by the high energy intensity of all sectors of the US economy including manufacturing industries. A potential explanation for the higher energy intensity is lower US energy price levels. However, common price elasticity estimates are not high enough to explain the observed differences between countries. Alternative explanations include firstly geographic or other locational differences and secondly firm specific technology differences between US firms and others. This study explores this latter possibility by comparing establishments of US firms in Britain with other comparable firms thereby ruling out locational differences. The findings are that on average US firms are not more energy intensive when operating in Britain. However, US firms that have only recently entered the UK market are found to be significantly more energy intensive at an order of magnitude corresponding to the between country US-UK gap. This difference vanishes with an increased duration of stay in the UK; however, with a considerable time lag. This suggests firstly, that barriers to knowledge diffusion are an important concern and secondly, that the long term response to a sustained price increase might be stronger than common price elasticity estimates suggest. The study also provides, for the first time, estimates of energy price elasticities for the UK on the basis of representative plant level panel data for the manufacturing sector.Energy efficiency, multinationals, energy demand elasticity, climate change

Productivity Dispersion, Competition and Productivity Measurement

A startling fact of firm level productivity analysis is the large and persistent differences in both labour productivity and total factor productivity (TFP) between firms in narrowly defined sectoral classes. The competitiveness of an industry is potentially an important factor explaining this productivity dispersion. The degree of competition has also implications for the measurement of TFP at the firm level. This paper firstly develops a novel control function approach to production function and TFP estimation explicitly taking imperfect competition into account. This addresses a number of issues with the control function approach to productivity estimation. Secondly, applying this new approach to UK data it shows that productivity dispersion on average is about 50 percent higher than with standard TFP measures. It also shows that accounting for imperfect competition matters for estimates of the persistence of TFP. Thirdly, the paper finds a negative relationship between competition and productivity dispersion.Productivity Measurement, Imperfect Competition, Productivity Dispersion, Productivity Spread

In brief: Saving the economy and the planet

The economic crisis may offer an opportunity to set the world on the right track for addressing climate change, writes Ralf Martin.

Multinationals and US Productivity Leadership: Evidence from Great Britain

We study the productivity of US owned plants in the UK. Using a new dataset that identifies foreign and domestic MNEs, we find that UK MNEs are less productive than US affiliates, but as productive as non US foreign affiliates. We investigate the source of the US and MNE advantage. We find evidence confirming that the MNE advantage is driven by sharing superior firm level assets across plants and by cherry picking the better plants in a country. The additional superiority of US firms seems entirely driven by their particular ability to takeover the best British plants. Thirdly, the study features a novel approach to TFP calculation.Multinational Firms, Productivity, Foreign Ownership, US leadership, Double Fixed-Effects

Boosting Classifiers for Drifting Concepts

This paper proposes a boosting-like method to train a classifier ensemble from data streams. It naturally adapts to concept drift and allows to quantify the drift in terms of its base learners. The algorithm is empirically shown to outperform learning algorithms that ignore concept drift. It performs no worse than advanced adaptive time window and example selection strategies that store all the data and are thus not suited for mining massive streams. --