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Identifying productivity when it is a factor of production

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  • Zach Flynn

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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  • Zach Flynn, 2020. "Identifying productivity when it is a factor of production," RAND Journal of Economics, RAND Corporation, vol. 51(2), pages 496-530, June.
    • Handle: RePEc:bla:randje:v:51:y:2020:i:2:p:496-530
    DOI: 10.1111/1756-2171.12323
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