Firm-level, revenue-based productivity measures are ubiquitous in studies of firm dynamics and aggregate outcomes. One common measure is increasingly interpreted as reflecting "distortions" since in distortions' absence, equalization of marginal revenue products should yield no dispersion in this measure. Another common but distinct measure is the residual of the firm-level revenue function, which reflects "fundamentals." Using micro-level US manufacturing data, we find these alternative measures are highly correlated, exhibit similar dispersion, and have similar relationships with growth and survival. However, the distinction between these alternative measures is critically important for quantitative assessment of the level and decline of allocative efficiency.
Blackwood, G. Jacob, Lucia S. Foster, Cheryl A. Grim, John Haltiwanger, and Zoltan Wolf.
"Macro and Micro Dynamics of Productivity: From Devilish Details to Insights."
American Economic Journal: Macroeconomics,
Firm Behavior: Theory
Firm Behavior: Empirical Analysis
Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Industry Studies: Manufacturing: General