The Life-cycle Growth of Plants: The Role of Productivity, Demand and Wedges
We develop a framework that uses price and quantity information on both firms' outputs and inputs to assess the roles, on firm dynamics and welfare, of efficiency, input prices, demand/quality, idiosyncratic markups, and residual wedges. Our strategy nests previous approaches limited by data availability. In our application, demand/quality is found to dominate the cross sectional variability of sales growth, while quality-adjusted input prices and residual wedges play dampening roles, especially at birth. Markups play only a modest role for cross-sectional variability of sales growth but are important in explaining welfare losses from revenue productivity dispersion.
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Document Object Identifier (DOI): 10.3386/w27184