What Determines Productivity?
Journal of Economic Literature 2011, 49:2, 326–365 http:www.aeaweb.org/articles.php?doi=10.1257/jel.49.2.326
What Determines Productivity?
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Economists have shown that large and persistent differences in productivity levels across businesses are ubiquitous. This nding has shaped research agendas in a number of elds, including (but not limited to) macroeconomics, industrial organization, labor, and trade. This paper surveys and evaluates recent empirical work addressing the question of why businesses differ in their measured productivity levels. The causes are manifold, and differ depending on the particular setting. They include elements sourced in production practices—and therefore over which producers have some direct control, at least in theory—as well as from producers’ external operating environments. After evaluating the current state of knowledge, I lay out what I see are the major questions that research in the area should address going forward. ( JEL D24, G31, L11, M10, O30, O47)
1. Introduction hanks to the massive infusion of detailed production activity data into economic study over the past couple of decades, researchers in many elds have learned a great deal about how rms turn inputs into outputs. Productivity, the ef ciency with which this conversion occurs, has been a topic of particular interest. The particulars of these studies have varied depending on the researchers’ speci c interests, but there is a common thread. They have documented, virtually without exception, enormous and
* University of Chicago and National Bureau of Economic Research. I thank Eric Bartelsman, Nick Bloom, Roger Gordon, John Haltiwanger, Chang-Tai Hsieh, Ariel Pakes, Amil Petrin, John Van Reenen, and anonymous referees for helpful comments. This work is supported by the NSF (SES-0519062 and SES-0820307), and both the Stigler Center and the Centel Foundation/Robert P. Reuss Faculty Research Fund at the University of Chicago Booth School of Business.
T
What Determines Productivity?
C S
*
Economists have shown that large and persistent differences in productivity levels across businesses are ubiquitous. This nding has shaped research agendas in a number of elds, including (but not limited to) macroeconomics, industrial organization, labor, and trade. This paper surveys and evaluates recent empirical work addressing the question of why businesses differ in their measured productivity levels. The causes are manifold, and differ depending on the particular setting. They include elements sourced in production practices—and therefore over which producers have some direct control, at least in theory—as well as from producers’ external operating environments. After evaluating the current state of knowledge, I lay out what I see are the major questions that research in the area should address going forward. ( JEL D24, G31, L11, M10, O30, O47)
1. Introduction hanks to the massive infusion of detailed production activity data into economic study over the past couple of decades, researchers in many elds have learned a great deal about how rms turn inputs into outputs. Productivity, the ef ciency with which this conversion occurs, has been a topic of particular interest. The particulars of these studies have varied depending on the researchers’ speci c interests, but there is a common thread. They have documented, virtually without exception, enormous and
* University of Chicago and National Bureau of Economic Research. I thank Eric Bartelsman, Nick Bloom, Roger Gordon, John Haltiwanger, Chang-Tai Hsieh, Ariel Pakes, Amil Petrin, John Van Reenen, and anonymous referees for helpful comments. This work is supported by the NSF (SES-0519062 and SES-0820307), and both the Stigler Center and the Centel Foundation/Robert P. Reuss Faculty Research Fund at the University of Chicago Booth School of Business.
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