Productivity and Scale Effect in Closely Related Firms

Abstract

In this article we provide empirical evidence for the time evolution of productivity in the Spanish tile sector throughout the 1990s. The article focuses on the link between the size of the firm and its productivity. Data Envelopment Analysis is used to estimate the production frontier. The Malmquist productivity index is considered to measure the Total Factor Productivity (TFP), and the Ray and Desli (1997) decomposition is applied to break it down into three drivers: technical change, catching-up and scale effect. Empirical results suggest that there is a direct correlation between firm size and productivity growth, mainly due to technical change and catching-up effect.

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