Dispersion and Volatility of TFPQ in Service Industries

Author Name MORIKAWA Masayuki (Vice Chairman & Vice President, RIETI)
Creation Date/NO. June 2017 17-E-088
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This study, using microdata on narrowly-defined service industries, presents empirical findings on the cross-sectional dispersion and time-series volatility of total factor productivity (TFP). The novelty of this study lies in its use of high-frequency, establishment-level panel data to compare the physical measure of productivity (TFPQ) and revenue-based productivity (TFPR) in the service industries. According to the analysis, first, TFPQ and TFPR are highly correlated with each other in terms of cross-section as well as time-series dimensions. Second, the within-industry dispersion of TFPQ is not necessarily larger than that of TFPR, which differs from past studies on the manufacturing sector. Third, TFPQ dispersion is lower when aggregated industry-level TFPQ is higher, and vice versa. Fourth, service producers with highly volatile TFP are less productive.

Forthcoming: Morikawa, Masayuki. "Dispersion and volatility of TFPQ and TFPR:Findings from three service industries," Industrial and Corporate Change.

This is the English version of the Japanese Discussion Paper (17-J-010) with some additional information and changes.