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Aggregate Productivity Growth: Lessons from Microeconomic Evidence

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TLDR
The authors examined the relationship between microeconomic productivity dynamics and aggregate productivity growth using establishment-level data for U.S. manufacturing establishments as well for selected service industries and found that the contribution of reallocation of outputs and inputs from less productive to more productive establishments plays a significant role in accounting for aggregate productivity.
Abstract
In this paper, we exploit establishment-level data to examine the relationship between microeconomic productivity dynamics and aggregate productivity growth. After synthesizing the evidence from recent studies, we conduct our own analysis using establishment-level data for U.S. manufacturing establishments as well for selected service industries. The use of longitudinal micro data on service sector establishments is one of the novel features of our analysis. Our main findings are summarized as follows: (i) the contribution of reallocation of outputs and inputs from less productive to more productive establishments plays a significant role in accounting for aggregate productivity growth; (ii) for the selected service industries considered, the contribution of net entry (more productive entering establishments displacing less productive exiting establishments) is dominant; (iii) the contribution of net entry to aggregate productivity growth is disproportionate and is increasing in the horizon over which the changes are measured since longer horizon yields greater differentials from selection and learning effects; (iv) the contribution of reallocation to aggregate productivity growth varies over time (e.g. is cyclically sensitive) and industries and is somewhat sensitive to subtle differences in measurement and decomposition methodologies.

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References
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Book

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TL;DR: In this paper, the authors present a history of the first half of the 20th century, from 1875 to 1914, of the First World War and the Second World War.
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A Model of Growth Through Creative Destruction

Philippe Aghion, +1 more
- 01 Mar 1992 - 
TL;DR: In this paper, a model of endogenous growth is developed in which vertical innovations, generated by a competitive research sector, constitute the underlying source of growth and equilibrium is determined by a forward-looking difference equation, according to which the amount of research in any period depends upon the expected amount of the research next period.
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The Dynamics Of Productivity In The Telecommunications Equipment Industry

TL;DR: In this article, the authors developed an estimation algorithm that takes into account the relationship between productivity on the one hand, and both input demand and survival on the other, guided by a dynamic equilibrium model that generates the exit and input demand equations needed to correct for the simultaneity and selection problems.
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The Dynamics of Productivity in the Telecommunications Equipment Industry

G. Steven Olley, +1 more
- 01 Nov 1996 - 
TL;DR: In this paper, an empirical focus is on estimating the parameters of a production function for the equipment industry, and then using those estimates to analyze the evolution of plant-level productivity.