We investigate productivity convergence of domestic firms in a transition economy, Ro- mania. In estimating total factor productivity we allow for varying returns to scale and control for both the endogeneity of the productivity shock and the omitted price variable bias linked to heterogeneous firms' market power. Consistently with our priors, we find that without controlling for the omitted price variable bias absolute convergence estimates are biased upwards. In terms of conditional convergence, we find that the speed of convergence across firms depends mainly on technology transfers from the frontier and, less markedly, by a number of regional and industrial characteristics such as the distance to the capital region, the minimum efficient scale and the absorptive capacity.

Additional Metadata
Keywords multinational firms, productivity, transition economies
JEL Multinational Firms; International Business (jel F23), Market Structure, Firm Strategy, and Market Performance: General (jel L10), Socialist Systems and Transitional Economies: General (jel P20)
Publisher Bocconi University, Milan
Persistent URL hdl.handle.net/1765/12059
Altomonte, C, & Pennings, H.P.G. (2008). Productivity Growth and the Speed of Convergence of Domestic Firms. Bocconi University, Milan. Retrieved from http://hdl.handle.net/1765/12059