The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade

Abstract

Understanding the nature and magnitude of resource reallocation, particularly as it relates to productivity growth, is important both because it affects how we model and interpret aggregate productivity dynamics, and also because market structure and institutions may affect the reallocation's magnitude and efficiency. Most evidence to date on the connection between reallocation and productivity dynamics for the U.S. and other countries comes from a single industry: manufacturing. Building upon a unique establishment-level data set of U.S. retail trade businesses, we provide some of the first evidence on the connection between reallocation and productivity dynamics in a non-manufacturing sector. Retail trade is a particularly appropriate subject for such a study since this large industry lies at the heart of many recent technological advances, such as E-commerce and advanced inventory controls. Our results show that virtually all of the productivity growth in the U.S. retail trade sector over the 1990s is accounted for by more productive entering establishments displacing much less productive exiting establishments.Interestingly, much of the between-establishment reallocation is a within, rather than between-firm phenomenon.

Corruption and the effects of economic freedom

“…Inefficiencies caused by an over-regulated economic system seem, therefore, to be able to distort private productive activity and to influence corruptive behaviours. Because of the critical role that the labour market plays in the process of economic development (see, e.g., Caballero and Hammour, 2000;Foster et al, 2002;Bartelsman et al, 2004), understanding whether labour market institutions actually help or hinder corruption phenomena stands out as an important task. Although very similar effects across countries are found when looking at individual components of government regulations, protection of employment registers the highest propensity (0.131) in affecting corruption.…”

The Case of the Missing Productivity Growth: Or, Does Information Technology Explain why Productivity Accelerated in the US but not the UK?

“…McKinsey (2001) provides anecdotal as well as quantitative evidence on the transformation of wholesale and retail trade; Foster, Haltiwanger, and Krizan (2002) link the retail industry data to firm-level developments. We would note that Jorgenson, Ho, and Stiroh (2002), who use output data from the BLS Office of Employment Projections, do not find as important a contribution from the trade sectors.…”

Assessing the Productivity of the UK Retail Sector

“…At the store level (rather than at the level of the firm), early studies in the US seemed to show that virtually all of the productivity growth in US retail trade during the 1990s was accounted for by more productive entering establishments over much less productive exiting establishments (Foster, Haltiwanger & Krizan, 2002). By comparison, a later study using UK micro-level data between 1997 and 2001 calculated that the entry and exit of firms was a lesser fraction of productivity growth in retailing than in the US (Haskel & Khawaja, 2003;Griffith et al, 2003).…”