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Within-Firm Productivity Dispersion: Estimates and Implications

This paper develops a flexible recipe for identifying unobserved input allocations, as well as quantity- and revenue-based total factor productivity (TFP) across product lines, for multiproduct producers, using demand- and supply-side information. Applying variants of this recipe to a panel of plants manufacturing machinery in India from 2000–2007 yields sizable within-plant TFP differences. Removing an average plant’s lowest-performing product increases the unweighted average of plant-level revenue-based productivity by 10%–65%. A 1 standard deviation decline in product-level revenue-based TFP generates around a 6 percentage point increase in the probability of dropping that product.