TY  - JOUR
AU  - Bartelsman,Eric J.
AU  - Haltiwanger,John C.
AU  - Scarpetta,Stefano
TI  - Cross-Country Differences in Productivity:  The Role of Allocation and Selection
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15490
PY  - 2009
Y2  - November 2009
UR  - http://www.nber.org/papers/w15490
L1  - http://www.nber.org/papers/w15490.pdf
N1  - Author contact info:
Eric Bartlesman
Vrije Universiteit Amsterdam
Tinbergen Institute
E-Mail: ebartelsman@alum.mit.edu

John C. Haltiwanger
Department of Economics
University of Maryland
College Park, MD 20742
Tel: 301/405-3504
Fax: 301/405-3542
E-Mail: haltiwan@econ.umd.edu

Stefano Scarpetta
OECD
Directorate for Employment,
Labour and Social Affairs
2, rue Andrè-Pascal
75775 Paris Cedex 16, France
E-Mail: stefano.scarpetta@oecd.org
AB  - This paper combines different strands of the productivity literature to investigate the effect of idiosyncratic (firm-level) policy distortions on aggregate outcomes. On the one hand, a growing body of empirical research has been relating cross-country differences in key economic outcomes, such as productivity or output per capita, to differences in policies and institutions that shape the business environment. On the other hand, a branch of empirical research has attempted to shed light on the determinants of productivity at the firm level and the evolution of the distribution of productivity across firms within each industry.  In this paper, we exploit a rich source of data with harmonized statistics on firm level variation within industries for a number of countries. Our key empirical finding is that there is substantial variation in the within-industry covariance between size and productivity across countries, but this covariance varies significantly across countries and is affected by the presence of idiosyncratic distortions. We develop a model in which heterogeneous firms face adjustment frictions (overhead labor and quasi-fixed capital) and idiosyncratic distortions. We show that the model can be readily calibrated to match the observed cross-country patterns of the within-industry covariance between productivity and size and thus help to explain the observed differences in aggregate performance.
ER  -