Original Article
Identifying productivity when it is a factor of production
Zach Flynn,
Zach Flynn,
I thank Amit Gandhi, Alan Sorensen, Ken Hendricks, Enghin Atalay, Jack Porter, Xiaoxia Shi, Daniel Quint, Michael Dickstein, Nathan Yoder, Andrea Guglielmo, James Traina, Seth Benzell, participants at seminars at the University of Wisconsin - Madison, University of California Davis, Louisiana State University, the Federal Trade Commission, the Brattle Group, Chad Syverson (the editor), and two anonymous referees for comments and criticism that improved this article.
Abstract
Economists typically model a plant's productivity as an exogenous characteristic, but the people who run and work at manufacturing plants make choices, at a cost, that affect plant productivity. I develop a method to partially identify the productivity distribution when such choices determine productivity. The method uses a monotone comparative static result I prove in a general economic model. It does not require instruments or timing assumptions. I use the method to study the effect of implementing market-based pricing on productivity in the electricity generation industry.
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