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Identifying productivity when it is a factor of production
Author(s) -
Flynn Zach
Publication year - 2020
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12323
Subject(s) - productivity , production (economics) , economics , total factor productivity , work (physics) , productivity model , industrial organization , distribution (mathematics) , microeconomics , monotone polygon , econometrics , natural resource economics , environmental economics , macroeconomics , engineering , mathematics , mathematical analysis , mechanical engineering , geometry
Abstract Economists typically model a plant's productivity as an exogenous characteristic, but the people who run and work at manufacturing plants make choices, at a cost, that affect plant productivity. I develop a method to partially identify the productivity distribution when such choices determine productivity. The method uses a monotone comparative static result I prove in a general economic model. It does not require instruments or timing assumptions. I use the method to study the effect of implementing market‐based pricing on productivity in the electricity generation industry.