Upcoming Events

Economics Department Seminar Series

Friday, January 20th 3:30-5:00, 444 Fronczak

Presenter: Matthew Backus, University of Michigan

Seminar Title: "Why is Productivity Correlated with Competetion?"

Abstract:

The positive correlation between average establishment-level productivity and measures
of competitiveness is oft-observed but still controversial, despite its implications
for competition policy and its centrality in the debate over the origins of the productivity
eect of trade liberalization. This paper considers two competing explanations for
the existence of the correlation: a causal relationship between productivity and competition,
also known as X-inefficiency, and a market-level dynamic selection story that has
gained ground in the trade literature. This paper demonstrates that the two effects
are econometrically separable. Two empirical approaches are developed: a quantile
response model and a selection correction procedure derived from a model of Markov-perfect
industry dynamics. Both are applied to the ready-mix concrete industry, where
it is found that X-inefficiency is the stronger explanation.