Industrial competition, shifts in market share and productivity growth

Most of the empirical studies label the first term on the right hand side the ‘pure’ productivity effect, the second term as the ‘reallocation’ effect. [...] In the particular counterfactual chosen here, we assume that in the absence of the competition that leads to market-share change, both exiting plants and continuing plants would have remained in the market at the end of a period and that there would have been no changes in their output shares during the period. [...] This relative difference in the importance of turnover in the two components is also found over the two previous periods.9 Most of the within-plant productivity contribution comes from the plants that increased market share. [...] The greater the shifts in market share in a period, the higher was aggregate labour productivity growth in the period. [...] A slowdown in productivity growth in the 1979-1988 period relative to the 1973-1979 period occurred as the pace of shifts in market share 9 See Baldwin and Gu (2002) for an analysis of the components of entry that examine the difference between foreign and domestic plants, single enterprise and multi-enterprise plants.