On the Dynamics of the U.S. Manufacturing Productivity Distribution

In this paper a model of productivity dynamics of manufacturing industries is developed with key features being the absence of optimal decisions and equilibrium coordination, heterogeneity of industries with respect to their innovative ability and cumulativeness of innovations together with the working of spillover effects. From that model the law of motion of the productivity distribution across the industries is derived and nonparametrically estimated using data for U.S. manufacturing industries over the period 1958-96. The conclusion of a substantial role of persistence in the productivity development is sharpened by the application of unit root and stationarity tests for panel data.