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Measured productivity with endogenous markups and economic profits

Savagar, Anthony (2021) Measured productivity with endogenous markups and economic profits. Journal of Economic Dynamics and Control, 133 . Article Number 104232. ISSN 0165-1889. (doi:10.1016/j.jedc.2021.104232) (KAR id:90370)


I study the effect of dynamic firm entry, scale economies and oligopolistic competition on measured productivity. These features cause endogenous, procyclical, fluctuations in measured productivity (Solow residual). I analytically decompose measured productivity into a pure technology component and an endogenous component. I show that the endogenous component arises because dynamic firm entry and oligopolistic competition cause firms to vary their optimal production which in turn interacts with returns to scale generating productivity effects. I estimate the pure technology series which shows that it is less volatile

and more persistent than a standard Solow residual. Lastly, I simulate the model with the pure technology process and show that the model mechanisms generate output amplification relative to a benchmark monopolistic competition, static entry, model.

Item Type: Article
DOI/Identification number: 10.1016/j.jedc.2021.104232
Uncontrolled keywords: Markups, firm entry, productivity, scale economies, oligopolistic competition
Subjects: H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Anthony Savagar
Date Deposited: 12 Oct 2021 08:04 UTC
Last Modified: 09 Dec 2022 00:06 UTC
Resource URI: (The current URI for this page, for reference purposes)

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