Materials Prices and Productivity

72 Pages Posted: 3 Jul 2012

See all articles by Enghin Atalay

Enghin Atalay

University of Chicago - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2012

Abstract

There is substantial within-industry variation, even within industries that use and produce homogeneous inputs and outputs, in the prices that plants pay for their material inputs. I explore, using plant-level data from the U.S. Census Bureau, the consequences and sources of this variation in materials prices. For a sample of industries with relatively homogeneous products, the standard deviation of plant-level productivities would be 7% lower if all plants faced the same materials prices. Moreover, plant-level materials prices are both persistent across time and predictive of exit. The contribution of net entry to aggregate productivity growth is smaller for productivity measures that strip out differences in materials prices. After documenting these patterns, I discuss three potential sources of materials price variation: geography, differences in suppliers’ marginal costs, and suppliers price discriminatory behavior. Together, these variables account for 13% of the dispersion of materials prices. Finally, I demonstrate that plants marginal costs are correlated with the marginal costs of their intermediate input suppliers.

Suggested Citation

Atalay, Enghin, Materials Prices and Productivity (June 1, 2012). US Census Bureau Center for Economic Studies Paper No. CES-WP- 12-11, Available at SSRN: https://ssrn.com/abstract=2097820 or http://dx.doi.org/10.2139/ssrn.2097820

Enghin Atalay (Contact Author)

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

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