Firm-Embedded Productivity and Cross-Country Income Differences

Vanessa Alviarez, Javier Cravino and Natalia Ramondo

No 39, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

Abstract: We measure the contribution of firm-embedded productivity to cross-country income differences. By firm-embedded productivity we refer to the components of productivity that differ across firms and that can be transferred internationally, such as blueprints, management practices, and intangible capital. Our approach relies on microlevel data on the cross-border operations of multinational enterprises (MNEs). We compare the market shares of the exact same MNE in different countries and document that they are about four times larger in developing than in high-income countries. This finding indicates that MNEs face less competition in less-developed countries, suggesting that firm-embedded productivity in those countries is scarce. We propose and implement a new measure of firm-embedded productivity based on this observation. We find a strong positive correlation between our measure and output per-worker across countries. In our sample, differences in firm-embedded productivity account for roughly a third of the cross-country variance in output per-worker.

Keywords: Development accounting; total factor productivity; Multinational enterprises (search for similar items in EconPapers)
JEL-codes: F23 F41 F62 O10 O40 (search for similar items in EconPapers)
Pages: 56
Date: 2020-10-13
New Economics Papers: this item is included in nep-bec, nep-eff and nep-ore
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Related works:
Working Paper: Firm-Embedded Productivity and Cross-Country Income Differences (2021)
Working Paper: Firm-Embedded Productivity and Cross-Country Income Differences (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:88909

DOI: 10.21034/iwp.39

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