Dynamic Olley‐Pakes productivity decomposition with entry and exit

2015/04/23 by Marc J. Melitz, Sašo Polanec · 1 citation
Economics, Econometrics and Finance · #Economic Growth and Productivity #Firm Innovation and Growth #Global trade and economics

paper · doi:10.1111/1756-2171.12088

openalex publication_date 2015/04/23 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/22

Abstract

We propose an extension of the Olley and Pakes ( ) productivity decomposition that accounts for the contributions of surviving, entering, and exiting firms to aggregate productivity changes. We argue that the other decompositions that break down aggregate productivity changes into similar components introduce some biases in the measurement of the contributions of entry and exit. We apply our proposed decomposition to Slovenian manufacturing data and contrast our results with those of other decompositions. We find that, over a five‐year period, the measurement bias associated with entry and exit is substantial, accounting for up to 10 percentage points of aggregate productivity growth.

Cited by

• The Divergent Dynamics of Labor Market Power in Europe

Related

• Entry and exit dynamics in the Austrian manufacturing industries
• The Dynamics of Productivity in the Telecommunications Equipment Industry
• Firm Entry and Exit with Unbounded Productivity Growth
• Three stages of net entry into Austrian manufacturing. Entrepreneurial experimentation and actual entry.
• The effect of technology and demand shocks on structural and industrial dynamics. Evidence from Austrian manufacturing.