TFP estimation at firm level: The fiscal aspect of productivity convergence in the UK

Bournakis, Ioannis ORCID logoORCID: and Sushanta, Mallick (2018) TFP estimation at firm level: The fiscal aspect of productivity convergence in the UK. Economic Modelling, 70 . pp. 579-590. ISSN 0264-9993 [Article] (doi:10.1016/j.econmod.2017.11.021)

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This paper reviews the state of the art in firm-level Total Factor Productivity (TFP) estimation employing an unbalanced panel of 7400 manufacturing firms in the UK during 2004–2011. The five methodologies considered are Superlative Index Numbers, System-GMM, Olley and Pakes (1996), Levisohn and Petrin (2003) and Ackerberg et al. (2015). Each of these estimators assumes different underlying properties for some inputs, which potentially affect the TFP measurements. We analyze the role of corporate taxation within a TFP catch-up model, providing new insights on the unexplored fiscal aspect of the UK productivity puzzle. Our findings are summarized as: (i) the Ackerberg et al. (2015) algorithm is the cutting-edge estimation technique with most plausible results, while GMM system (GMM-SYS) is the second best estimator; (ii) the global financial crisis in 2009 impacted negatively on TFP; (iii) corporate tax adversely affects TFP growth as it induces distortive effects on productivity enhancing investment; (iv) the adverse effect is found to be severe in the groups of R&D and exporting firms, suggesting that the distortive nature of corporate tax affects disproportionately the firms that are more financially constrained and more exposed to risk.

Item Type: Article
Research Areas: A. > Business School > Economics
Item ID: 23178
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Depositing User: Ioannis Bournakis
Date Deposited: 12 Dec 2017 12:46
Last Modified: 29 Nov 2022 20:03

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