The paper presents a new framework to assess firm level heterogeneity and to study the rate and direction of technical change. Building on the analysis of revealed short-run production functions by Hildenbrand (1981), we propose the (normalized) volume of the zonotope composed by vectors-firms in a narrowly defined industry as an indicator of inter-firm heterogeneity. Moreover, the angles that the main diagonal of the zonotope form with the axes provide a measure of the rates and directions of productivity change over time. The proposed framework also accounts for n-inputs and m-outputs and, crucially, the measures of heterogeneity and technical change do not require many of the standard assumptions from production theory.
Giovanni, D., Grazzi, M., Luigi, M., Simona, S., Production theory: accounting for firm heterogeneity and technical change, <<JOURNAL OF INDUSTRIAL ECONOMICS>>, 2016; 64 (4): 875-907. [doi:10.1111/joie.12128] [http://hdl.handle.net/10807/123358]
Production theory: accounting for firm heterogeneity and technical change
Grazzi, Marco;
2016
Abstract
The paper presents a new framework to assess firm level heterogeneity and to study the rate and direction of technical change. Building on the analysis of revealed short-run production functions by Hildenbrand (1981), we propose the (normalized) volume of the zonotope composed by vectors-firms in a narrowly defined industry as an indicator of inter-firm heterogeneity. Moreover, the angles that the main diagonal of the zonotope form with the axes provide a measure of the rates and directions of productivity change over time. The proposed framework also accounts for n-inputs and m-outputs and, crucially, the measures of heterogeneity and technical change do not require many of the standard assumptions from production theory.
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