Macro and Micro Dynamics of Productivity: From Devilish Details to Insights

Firm-level, revenue-based productivity measures are ubiquitous in studies of firm dynamics and aggregate outcomes. One common measure is increasingly interpreted as reflecting “distortions” since distortions’ absence, equalization marginal revenue products should yield no dispersion this measure. Another but distinct the residual firm-level function, which reflects “fundamentals.” Using micro-level US manufacturing data, we find these alternative highly correlated, exhibit similar dispersion, have relationships with growth survival. However, distinction between critically important for quantitative assessment level decline allocative efficiency. (JEL D21, D22, D24, G32, L60)