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WP10 Linkages with Micro Data. Overview, remaining work, and some new results Brussels, March 16-17, 2007 Eric Bartelsman

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Wp10 linkages with micro data

WP10 Linkages with Micro Data

Overview, remaining work, and some new results

Brussels, March 16-17, 2007

Eric Bartelsman

The EUKLEMS project is funded by the European Commission, Research DG, 6th Framework Programme, Priority 8, "Policy Support and Anticipating Scientific and Technological Needs".




Replicated LMD+

Micro-data linkages

Longitudinal Micro Data

National Accounts Industry Data


Business Registers

Macro and Sectoral Timeseries

Single country




Multiple countries

Wp10 objectives
WP10 Objectives

  • Integrate (existing) micro measures of within industry firm-level distributions with the EU-KLEMS data.

  • Conduct empirical work using the augmented EU KLEMS data to explore recent theoretical models linking growth to firm dynamics and heterogeneity.

  • Facilitate the analysis of productivity in work package 9 on technology and innovation by providing firm-level data

  • Investigate potential to use firm level data in future updates of EU KLEMS Productivity Database.

Euklems integrating micro indicators
EUKLEMS+: Integrating micro indicators

  • Concordance are done

  • Firm-level indicators are being documented/organized.

  • Looking for pilot-projects: EUKLEMS+

    • Transition economies and Turkey (Bartelsman&Scarpetta)

    • WP9 ???

    • Labor market flexibility

Links with wp 9
Links with WP 9

  • WP10 access to micro data may provide indicators for WP9

  • We may consider using expertise built up in:

    • OECD - micro innovation project

    • Eurostat/ONS ICT-firm performance project. This project uses linked micro datasets (PS, Ecommerce, R&D) and infrastructure at NSOs. Also EUKLEMS industry hierarchy is used.

Micro data for updating euklems
Micro-data for updating EUKLEMS

  • Many indicators, especially those outside of SNA framework, may be collected directly from linked micro datasets using distributed micro data analysis.

    • Labor quality

    • Investment by industry/asset

  • Harmonized approach can coordinate technical details, eg sample reweighting.

  • An inventory of available sources and metadata needs to be made

    • Volunteer: someone with overview of WP2/3

Creative destruction and productivity in the turkish manufacturing industry

Creative Destruction and Productivity in the Turkish Manufacturing Industry

Eric Bartelsman

Vrije Universiteit Amsterdam, Tinbergen Institute, IZA

(joint with Stefano Scarpetta, OECD)

Small manufacturing firms 1990s firms with 10 to 20 employees as a percentage of total
Small manufacturing firms, 1990s Manufacturing Industry (firms with 10 to 20 employees as a percentage of total)

Relative size of entrants average size of entrant firms divided by the average size of incumbents
Relative size of entrants (average size of entrant firms divided by the average size of incumbents)

Survivor size relative to entry size by age
Survivor size, relative to entry size, by age divided by the average size of incumbents)

Gross and net firm turnover: Transition Economies divided by the average size of incumbents)

Cross country differences in productivity the role of allocative efficiency

Eric Bartelsman, John Haltiwanger divided by the average size of incumbents)

and Stefano Scarpetta*

*Vrije Universiteit Amsterdam, Tinbergen Institute and IZA; University of Maryland, NBER, and IZA; OECD and IZA.

January 2007

Cross Country Differences in Productivity: The Role of Allocative Efficiency

Overview divided by the average size of incumbents)

  • Healthy, market economies exhibit the following features at the firm level:

    • Large dispersion of productivity across firms within narrowly defined sectors.

      • Must be due to some form of “friction”

        • Market power

        • Economies of scope/decreasing returns

        • Adjustment frictions and idiosyncratic shocks:

          • Search and matching frictions

          • Labor and capital adjustment costs

          • Entry and exit costs

    • Strong positive covariance between market share and productivity

      • Static allocative efficiency

    • Market selection is productivity enhancing

      • Market selection yields exit of less productive firms and establishments

    • High pace of input (e.g. jobs) and output reallocation

      • Uncertainty, experimentation, learning and selection as well as time varying idiosyncratic shocks

Distortions and allocative efficiency
Distortions and Allocative Efficiency? divided by the average size of incumbents)

  • Working conjecture:

    • Emerging and transition economies have market structure and institutions that distort allocative efficiency

      • Distortions:

        • Imperfect competition

        • Subsidies (explicit) or quotas/rationing of allocation to insiders/incumbents/favored businesses

        • Credit constraints to young and small businesses

        • Bribes and corruption (unevenly applied)

        • Doing Business inefficiencies:

          • Costly to start up a business

          • Costly to adjust employment

          • Poor or inefficient infrastructure (telephones, roads, electricity)

      • Key point: Distortions have idiosyncratic component: cross-sectional allocation is distorted

        • Entry barriers act in this way naturally

        • Credit constraints for young and small businesses

        • Arbitrary and capricious application of regulations

Aggregate productivity and allocation
Aggregate productivity and allocation divided by the average size of incumbents)

  • Olley and Pakes (1996) static decomposition:

    where: N: # of firms in a sector;

    • The first term is the unweighted average of firm-level productivity

    • The second term (OP cross term) reflects allocation of resources: do firms with higher productivity have greater market share.

    • Requires representative cross sectional samples but does not require accurate longitudinal linkages

      • Cannot quantify directly importance of entry and exit

    • By construction, cross term takes out country effects in productivity levels, so abstracts from some aspects of measurement error

Allocative efficiency (OP cross term): The gap between weighted and un-weighted labor productivity, 1990s

A Model of “Mis”-Allocation (Based on Rogerson and Restuccia (2003) (and

similar to Hsieh and Klenow (2006))

Consumers supply labor inelastically and maximize utility:

Firms maximize profits:

  • Ex ante firms do not know productivity or distortion but know distribution.

  • Pay entry fee, learn their draws, decide whether to produce.

  • Productivity and distortion draws are firm-specific and time invariant

  • Very low productivity/high distortion firms don’t produce

  • Decreasing returns yields dispersion in productivity/distortions

  • Overhead labor yields correlation between TFP and LP

Entry selection
Entry/Selection Restuccia (2003) (and

Ex Ante Joint Distribution

Exogenous probability of exiting in each period given by λ

Aggregate relationships and steady state equilibrium
Aggregate Relationships and Steady State Equilibrium Restuccia (2003) (and

μ(A,τ,) is ex post distribution

E is aggregate entry

Preliminary Calibration and Numerical Analysis of Model Restuccia (2003) (and

Note: All reported statistics are at steady state equilibrium reflecting selection.

  • γ = 0.9,

  • λ = .10, this is consistent with evidence of exit rates in the United States and other OECD countries (Bartelsman et al. 2004)

  • R=.03 and δ=.12, roughly consistent with long run real interest rates and depreciation rates in OECD countries.

  • f=.01,log(ce)=12.43

  • Ex ante A distribution: mean(log(A))=10.57, std(log(A))=0.35

Observations (Random distortion case)

  • Distortions affect various margins

    • Entry: amount and characteristics

    • Allocation among survivors

    • OP cross term reflects allocation for given survivors

  • Uncorrelated scale distortion

    • Slight increase in mean TFP/LP

      • Lower survival

    • Lower OP cross term for both TFP and LP

    • Affects entry and selection

    • Lower consumption (C) through lower productivity and excess churn

Observations 2
Observations (2) (Random distortion case)

  • Uncorrelated factor-mix distortion

    • Slight increase in Mean TFP and LP again

      • Lower survival

    • Not much impact on OP cross term for either TFP and LP

    • K/L too high

    • Lower C primarily through distorted high capital investment

  • Correlated scale distortion

    • Mean TFP/LP much lower

    • OP cross term very low

    • Adverse impact on survival

    • So: wrong firms survive, allocation poor amongst survivors and too much churn (everything wrong!)

    • Much lower C from all of these factors

Open questions
Open questions (Random distortion case)

  • Can we account for differences across countries in productivity via the distribution of distortions?

    • If so, what are these distortions?

      • Static vs. Dynamic distortions?

        • Is wedge between marginal product and factor prices because of adjustment costs (dynamic) or a more permanent distortion (e.g., favored businesses)

    • Can we quantify the reduction in distortions in transition economies that account for rising allocative efficiency?

    • Implications for growth: transition dynamics vs. steady state growth?

  • Missing pieces (many):

    • E.g., Differentiated products version of model

    • More frictions? (Experimentation/learning/adjustment costs)