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- Title
A Non‐parametric Estimation of Productivity with Idiosyncratic and Aggregate Shocks: The Role of Research and Development (R&D) and Corporate Tax.
- Authors
Bournakis, Ioannis; Tsionas, Mike
- Abstract
We develop a non‐parametric technique framework for estimating firm‐level Total Factor Productivity (TFP). Our paper has two major novelties: first, we propose a modelling of productivity with both firm‐idiosyncratic factors and aggregate shocks. Second, we apply the Bayesian Markov Chain Monte Carlo (MCMC) technique that offers a numerical integration of productivity outside the posterior overcoming the restrictive assumptions about the relationship between productivity and variable production inputs. We implement our methodology in a group of 4,286 manufacturing firms from France, Germany, Italy, and the UK (2001–14). The results show that: (i) aggregate shocks matter for firm TFP evolution. The global financial crisis of 2008 caused severe, albeit short, adverse effects on TFP; (ii) there is substantial heterogeneity across countries in the way firms react to changes in R&D and taxation. German and UK firms are more sensitive to fiscal changes than R&D, while the opposite is true for Italian firms. R&D and taxation effects are symmetrical for French firms; (iii) the UK productivity handicap continues for years after the financial crisis; and (iv) there are substantial knowledge spillovers among German and Italian firms.
- Subjects
UNITED Kingdom; NONPARAMETRIC estimation; MARKOV chain Monte Carlo; CORPORATE taxes; FINANCIAL crises; GLOBAL Financial Crisis, 2008-2009; COINTEGRATION
- Publication
Oxford Bulletin of Economics & Statistics, 2024, Vol 86, Issue 3, p641
- ISSN
0305-9049
- Publication type
Article
- DOI
10.1111/obes.12594