Olley–Pakes productivity decomposition: computation and inference
Hyytinen, A., Ilmakunnas, P., & Maliranta, M. (2016). Olley–Pakes productivity decomposition: computation and inference. Journal of the Royal Statistical Society Series A: Statistics in Society, 179(3), 749-761. https://doi.org/10.1111/rssa.12135
© 2015 Royal Statistical Society. This is a final draft version of an article whose final and definitive form has been published by Wiley. Published in this repository with the kind permission of the publisher.
We show how a moment-based estimation procedure can be used to compute point estimates and standard errors for the two components of the widely used Olley–Pakes decomposition of aggregate (weighted average) productivity. When applied to business level microdata, the procedure allows for autocovariance and heteroscedasticity robust inference and hypothesis testing about, for example, the coevolution of the productivity components in different groups of firms. We provide an application to Finnish firm level data and find that formal statistical inference casts doubt on the conclusions that one might draw on the basis of a visual inspection of the components of the decomposition.
PublisherWiley-Blackwell Publishing Ltd.; Royal Statistical Society
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