Firm productivity differences from factor markets

Cheng, W. and Morrow, J. (2018) Firm productivity differences from factor markets. Journal of Industrial Economics, 66(1), pp. 126-171. (doi: 10.1111/joie.12165)

Abstract

We model firm adaptation to local factor markets in which firms care about both the price and availability of inputs. The model is estimated by combining firm and population census data, and quantifies the role of factor markets in input use, productivity and welfare. Considering China's diverse factor markets, we find that within an industry interquartile labor costs vary by 30–80%, leading to 3–12% interquartile differences in TFP. In general equilibrium, homogenization of labor markets would increase real income by 1.33%. Favorably endowed regions attract more economic activity, providing new insights into within‐country comparative advantage and specialization.

• Item Type: Articles
• Keywords: Economics and econometrics, accounting, general business, management and accounting.
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Cheng, Dr Wenya
• Authors: Cheng, W., and Morrow, J.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Journal of Industrial Economics
• Publisher: Wiley
• ISSN: 0022-1821
• ISSN (Online): 1467-6451
• Published Online: 16 April 2018
• Copyright Holders: Copyright © 2018 The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd
• First Published: First published in Journal of Industrial Economics 66(1):126-171
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher