Transcript Firm demography and aggregate productivity growth: The Swedish case 1997-2003 Lars Fredrik Andersson.

Firm demography and aggregate productivity
growth: The Swedish case 1997-2003
Lars Fredrik Andersson
Introduction
This paper examines the dynamic relation between firm
demography and aggregated productivity growth in
Sweden 1997-2003
The paper is motivated by:
– Productivity growth is affect by reallocation of inputs and
outputs across enterprises
– The reallocation should reflect firm dynamics rather than
industry dynamics
– Large differences in productivity level between firms within
the same industry
– Given that firm demography has a significant impact on
aggregated productivity growth, this may shew the analysis
of different factors of production
By offering a large sample of firms covering all industries,
the impact of firm demography on productivity growth can
be discerned
Decomposition method suggested by Foster et al
Within effect
Betweeneffect
Cross effect
Entry effect
Exit effect

 
 

 
 
 
 
LPt    it k LPit    it ( LPit  k  LPt  k )    it LPit    it ( LPit  LPt k )    it  k ( LPit  k  LPt  k
iC
iC
iC
iN
iX
LPt  k
LP denotes labour productivity
Θ denotes labour share
Δ denotes to change between the first year (t-k) and the last year (t).
C, N and X refers to continuing, entering and exiting firms
LPt-k is the aggregate productivity level of the industry
The within effect is the firm productivity growth weighted by initial labour shares
The between-firm effect reflects changing labour shares
The cross effect accounts for changing labour shares and productivity growth
The entry effect denotes the sum of differences between entering firm’s
productivity and initial aggregate productivity, weighted by its labour shares
The exit effect denotes sum of differences between existing firm’s
labour productivity and initial aggregate labour productivity, weighted
by its labour shares
Data
Information on firm dynamics and economic statistics are
supplied by the IFDB database
Data on economics statistics i supplied by the BAS
database
Data on firm dynamics is supplied by FAD database
The method used in FAD classifies firms as an entry, exit
and incumbent firm depending on changes of labour force
within the firm.
The FAD and BAS data is linked by matching
organisational numbers
Sample criteria: Firms with >0employed, >0 value added
are included. Unincorporated firms are excluded.
Education,
social services
Financial and
business
services
Transport and
communications
Trade, hotel and
restaurants
Construction
and
infrastructure
Manufacturing
Primary sector
Sample of firms (n=184 544)
30000
25000
Entring
20000
15000
Exiting
10000
5000
Continuing
0
Entry of firms and labour productivity, index
1995=100, 1985-2004
Period of study
140
120
100
80
60
40
20
0
1985
1990
1995
Entry of firms
Labour productivity
2000
Decomposition of productivity: total economy
25,0%
20,0%
15,0%
10,0%
5,0%
0,0%
Within effect
-5,0%
Between effect
Dynamic effect
Net entry/exit effect
-2,0%
-4,0%
Education,
social services
Financial and
business
services
Transport and
communications
Trade, hotel and
restaurants
Construction
and
infrastructure
Manufacturing
Primary sector
Decomposition of productivity by sectors (ΔLP=22.1)
18,0%
16,0%
14,0%
Net entry/exit effect
12,0%
10,0%
8,0%
6,0%
Between and cross
effect
4,0%
2,0%
0,0%
Within effect
Decomposition of productivity by manufacturing industry (ΔLP=41,3)
14,0%
12,0%
Net entry/exit effect
10,0%
8,0%
Between and cross effect
6,0%
4,0%
2,0%
Within effect
Other
manufacturing
industries
Motor vehicles
Industry for
electronics and
communication
equipment
Mechanical
engineering
Basic metals
Chemicals
-2,0%
Forest industri
0,0%
Decomposition of labour productivity i transport and
communication sector (ΔLP=56,7)
40,0%
30,0%
20,0%
Net entry/exit effect
10,0%
0,0%
Between and cross
effect
Communications
Supporting and
auxiliary
transport
activities
Air transport
Water transport
-20,0%
Inland transport
-10,0%
Within effect
Productivity decomposition of business services
(ΔLP= -9,1)
6,0%
4,0%
Net entry/exit effect
2,0%
0,0%
Between and cross
effect
-8,0%
-10,0%
-12,0%
Institute for
research and
development
Computer
and related
activities
-6,0%
Renting of
machinery
and
equipment
-4,0%
Real estate
activities
-2,0%
Within effect
Conclusions
This study support the notion that a large part of the
aggregate labour productivity is driven by what happens in
each individual firm, while shifts in reallocation of labour
from incumbents in decline to those that are growing play
less role
Although the contribution is small in the Swedish
manufacturing section, the entry of new units is important
in fostering the growth of labour productivity in some
services sectors
The study shows that the contribution of net entry on
aggregated productivity smaller than that reported in a
number of other studies. This may be explained by:
– A longer time period of study generally leads to greater
emphasis on net entry effect.
– The within effect is relatively smaller when the
decomposition is applied on multifactor productivity.
– Other decomposition methods can lead to larger entry/exit
effects