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This paper examines how prices, markups, and marginal costs respond to trade liberalization. We develop a framework to estimate markups from production data with multi-product firms. This approach does not require assumptions on the market structure or demand curves faced by firms, nor assumptions on how firms allocate their inputs across products. We exploit quantity and price information to disentangle markups from quantity-based productivity, and then compute marginal costs by dividing observed prices by the estimated markups. We use India's trade liberalization episode to examine how firms adjust these performance measures. Not surprisingly, we find that trade liberalization lowers factory-gate prices and that output tariff declines have the expected pro-competitive effects. However, the price declines are small relative to the declines in marginal costs, which fall predominantly because of the input tariff liberalization. The reason for this incomplete cost pass-through to prices is that firms offset their reductions in marginal costs by raising markups. Our results demonstrate substantial heterogeneity and variability in markups across firms and time and suggest that producers benefited relative to consumers, at least immediately after the reforms.

We consider identification and estimation of the firm-level gross production function with a controlled productivity evolution process and endogenous contemporaneous productivity determinants in the absence of instrumental variables (IVs). We allow the joint determination of firm productivity and its determinants, such as research and development, exports, and foreign direct investment, which is motivated by the recognition that certain unobserved confounders, such as CEO ability and managerial strategies, may simultaneously affect both productivity and these determinants. This assumption is in sharp contrast to those used in previous studies on proxy-variable estimation of production functions, in which productivity processes without determinants or with exogenous/predetermined determinants are often assumed. Since IVs for endogenous productivity determinants are in general difficult to obtain in the production context, we propose an IV-free generalized method of moments (GMM) estimator based on Lewbel et al. (2023) and use higher-order moments for unobserved errors in addition to conventional orthogonality conditions. We demonstrate the finite sample performance of the proposed estimator through Monte Carlo simulations. We also apply the methodology to investigate the impact of foreign equity on the productivity of Chinese manufacturing firms.

Existing literature at the nexus of firm productivity and export behavior mostly focuses on “learning by exporting,” whereby firms can improve their performance by engaging in exports. Whereas, the secondary channel of learning via cross-firm spillovers from exporting peers, or “learning from exporters,” has largely been neglected. Omitting this important mechanism, which can benefit both exporters and non-exporters, may provide an incomplete assessment of the total productivity benefits of exporting. In this paper, we develop a unified empirical framework for productivity measurement that explicitly accommodates both channels. To do this, we formalize the evolution of firm productivity as an export-controlled process, allowing future productivity to be affected by both the firm’s own export behavior as well as export behavior of spatially proximate, same-industry peers. This facilitates a simultaneous, “internally consistent” identification of firm productivity and the corresponding effects of exporting. We apply our methodology to a panel of manufacturing plants in Chile in 1995–2007 and find significant evidence in support of both direct and spillover effects of exporting that substantially boost the productivity of domestic firms.

Objective: This study proposes a novel empirical analysis of the total factor productivity (TFP) growth for Polish microenterprises, focusing on the effect of the global lockdown in 2020. We employed firm-level data covering enterprises with below ten employees to evaluate micro-firms’ productivity performance in Polish regions and sectors in 2010-2020. There are three main goals. Firstly, we estimated the production function elasticities for two-digit NACE sectors of microenterprises. Secondly, we performed the TFP growth decomposition between regions and sectors for Polish microenterprises. Thirdly, we aimed to identify the between- and within-firm components of productivity growth in microenterprises.Research Design Methods: We applied control function methods to estimate the production function for two-digit NACE Rev. 2 divisions and determine individual enterprises’ TFP. We based the estimations on an unbalanced panel dataset containing about 1 329 106 firms yearly. Thereafter, we employed the Olley-Pakes decomposition of TFP growth to analyse the efficiency of resource allocation measured by the between- and the within-firm component that captures the gains from firms’ productivity performance.Findings: We observed substantial heterogeneity between sectoral and regional TFP growths during the year of the COVID-19 pandemic outbreak. Productivity of microenterprises from the following sectors: construc-tion, wholesale and retail trade, professional, scientific and technical activities was influenced considerably by the lockdown. Microenterprises from regions with the highest gross value added (GVA) shares displayed out-standing productivity during the COVID-19 pandemic concerning weighted TFP levels and TFP growths. Based on the Olley-Pakes decomposition of TFP growth, we confirmed that before 2020, the TFP growth of microen-terprises in Poland was driven by within-firm gains. However, during the COVID-19 pandemic outbreak, the efficiency of resource allocation was an essential component of TFP growth.Implications Recommendations: Micro-firms play a significant role in the economy, but TFP analyses of microenterprises are sparse. Through this study, we showed that the pandemic outbreak significantly im-pacted micro-firms’ performance. We identified the industries and regions of the Polish economy that are the main drivers of productivity growth and those where the economic efficiency is below the expected performance. This study might help to identify regions and sectors of the Polish economy that suffer from substantial inefficiencies and thus require policy attention.Contribution Value Added: As the capital-driven development model might be reaching its limits in Poland, policymakers should focus on TFP as a main growth force. This study is the first empirical analysis of the TFP growth for microenterprises in Poland. We employed firm-level data from Statistics Poland covering microenterprises to evaluate micro-firms’ productivity performance in Polish regions and sectors before and during COVID-19

In this paper, we investigate the causal impact of workplace health and safety practices on firm performance, using Danish longitudinal matched employer-employee data merged with unique cross-sectional representative firm survey data on work environment conditions. We estimate standard production functions, augmented with workplace environment indicators, addressing both time-invariant and time-varying potentially relevant unobservables in the production process. We find positive and large productivity effects of improved physical dimensions of the health and safety environment, specifically, \"internal climate\" and \"monotonous repetitive work\".

In this paper, we have constructed and tested a simple methodology for assessing and predicting climate change effects on agricultural yields. The methodology follows two steps. First, we econometrically estimate the marginal product of key production inputs (e.g., labor and land), through the estimation of production functions. Then, we predict future agricultural sector performance, by assuming a future with climate-induced changes in the land use and in agricultural labor use, under different IPCC scenarios. We also assume that no dramatic technological change in agriculture production will occur in the near future, so that the selected inputs will present the same marginal product. We assume that the agricultural sector might develop differently under different climate change-induced scenarios and that the use of land and labor will change accordingly. In this way, we are able to compute predictions on the agricultural sector performance in the future, under very different circumstances. We apply the methodology for predicting the sector performance of the Veneto region in 2030. Results differ according to the selected IPCC scenario and consequent input use variations. In the selected case study, for instance, land presents a very high productivity and climate-induced changes in the land use might dramatically (positively and negatively) affect agricultural yields under different IPCC scenarios. In this perspective, the climate change adaptation and mitigation policies and options should primarily aim at the preservation of land productivity in Veneto.

This work analyzes the research productivity of agricultural and life science faculty in U.S. Land Grant research universities from 1975 to 2005. Production function estimations that control for inputs and demographic characteristics reveal significant improvements after 1980 in faculty research productivity per unit time, especially in the non-top ten universities. Because, however, time available to faculty for research has decreased substantially in the past three decades, overall journal article output per faculty did not increase after the 1980s. Our findings demonstrate large productivity increases but raise concerns about the optimal allocation of faculty time.

This article explores the relationship between capital composition and productivity using a unique, detailed dataset on firm investment in the United States in the late 1990s. I develop a methodology for estimating the separate effects of multiple capital types in a production function framework. I back out the implied marginal products of each capital type and compare these with rental price data. I find that although most capital types earned normal returns, information and communications technology capital goods had marginal products substantially above their rental prices. The article also provides evidence of complementarities and substitutabilities among capital types and between capital types and labor.

In order to assess the productivity effects of information and communication technologies (ICT), regressions based on cross-sectional firm-level data may yield unreliable results for the commonly employed production function framework. In this paper, various estimation biases and econometric strategies to overcome their sources are discussed. The effects are illustrated on the basis of a representative set of panel data for German service firms covering the period 1994 to 1999. The application of a suited SYS-GMM estimator yields evidence for significant productivity effects of ICT. However, these are substantially smaller than those suggested by cross-section estimates. [PUBLICATION ABSTRACT]

This paper uses Growth Accounting and Production Function Analysis to decompose the factors behind differences in growth between the UK, France and Germany between 1992 and 2005. Most of the growth differential between the United Kingdom, Germany and France since 1993 can be explained by structural factors. The United Kingdom's higher growth has originated essentially in the finance and business sector, which is ICT-intensive. Germany's weak growth reflects in large part the aftermath of the unification shock and a continued fall in the labour input. At the same time there has been a sharp slowdown in knowledge accumulation, which seems to have restrained labour productivity growth. After EMU, the performance of German manufacturing improved relative to both France and the United Kingdom, while capital deepening became less supportive to growth because of lower investment in infrastructures and dwellings. France's higher growth relative to Germany since 1999 comes essentially from the non-tradable sectors and from a higher labour input. This may be partly related to a more significant decline in the volatility of real interest rates.