Working Paper: CEPR ID: DP15427
Authors: Xavier Cirera; Diego Comin; Marcio Cruz; Kyung Min Lee
Abstract: We collect detailed data on the technologies used in a comprehensive set of business functions in a representative sample of firms in Vietnam, Senegal, and the Brazilian state of Ceará, and construct measures of technology sophistication at the business function and firm levels. There is a large variance of sophistication across firms, but we find that the variance of technology sophistication across the business functions of a firm (within-firm variance) is 2.8 times larger. We develop a model of technology adoption with heterogeneity in adoption costs across business functions and with non-homothetic production that induces heterogeneity in the marginal value of technology sophistication across functions. The model predicts a stable cross-firm relationship between sophistication in the business function and firm-level technology that we call the technology curve. We find that the slopes of technology curves differ greatly across business functions and that curves account for one third of within-firm variance in sophistication. A development accounting exercise shows that cross-firm variation in sophistication measures accounts for thirty percent of cross-firm differences in productivity
Keywords: Technology; Firm-level productivity; Technology sophistication
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| technology sophistication variance across business functions within firms (L63) | technology adoption uniformity (L15) |
| technology curves (O33) | within-firm variance in technology sophistication (L15) |
| cross-firm differences in technology sophistication (L15) | gap in productivity between firms (D22) |
| technology sophistication (L63) | productivity (O49) |