7/2006 Priit Vahter. Productivity in Estonian enterprises: The role of innovation and competition

Working Papers of Eesti Pank. No 7, 2006

This paper provides some stylised facts about differences in labour productivity and total factor productivity (TFP) in Estonian firms and about the role of selected determinants of productivity differences. Enterprise level panel data of the whole population of Estonian firms from years 1995-2002 is used.
It appears that the variation of productivity indicators in Estonia is much greater than in Western Europe. Although there is a lot of entry and exit of firms, there is not much movement within the productivity distribution of surviving .rms. It is found that both innovation and less concentrated market structure seem to be positively related to higher productivity of firms.
JEL Code: G3, L2, O31, O4
Key words: productivity, competition, innovation, market structure

Author's e-mail address: pvahter [at] mtk.ut.ee

The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank.

Contents

1. Introduction
2. Competition, innovation and productivity - literature overview
3. Methodology
4. Data
5. Descriptive statistics about the heterogeneity of productivity among firms
6. Analysis of selected determinants of productivity
7. Conclusions
References
Appendices
Appendix 1. Descriptive statistics from the Business Register database (labour productivity indicators)
Appendix 2. Descriptive statistics - dynamics of the unweighted average of value added per employee in manufacturing (in EEK)
Appendix 3. Descriptive statistics - dynamics of the unweighted average of value added per employee in services sector (in EEK)
Appendix 4. Labour productivity (sales/employees) transition matrix, manufacturing sector (1995-2002, percentages)
Appendix 5. Labour productivity (sales/employees) transition matrix, services sector (1995-2002, percentages)

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