The impact of new varieties on aggregate productivity growth

Although there is an extensive body of literature on aggregate productivity growth, reallocation, and firm turnover, the contribution to overall productivity growth from new firms that produce new varieties is not well understood. In this paper, we propose a framework for aggregating productivity th...

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Bibliographic Details
Published in:The Scandinavian journal of economics 2022-07, Vol.124 (3), p.646-676
Main Authors: Brasch, Thomas, Raknerud, Arvid
Format: Article
Language:English
Subjects:
Aggregation
demand elasticity
Labor productivity
labour productivity
Longitudinal studies
multifactor productivity
new varieties
panel data
pooled Feenstra
productivity growth
Soderbery estimator
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Summary:Although there is an extensive body of literature on aggregate productivity growth, reallocation, and firm turnover, the contribution to overall productivity growth from new firms that produce new varieties is not well understood. In this paper, we propose a framework for aggregating productivity that identifies the contribution from new firms that produce new varieties. Our framework generalizes the frameworks currently used in the literature. To illustrate the decomposition, we analyse the case of firm turnover in Norway. We find that the net creation of new varieties due to firm turnover contributes about half a percentage point to annual aggregate labour productivity growth in the manufacturing sector.
ISSN:0347-0520
1467-9442
DOI:10.1111/sjoe.12464