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Working Paper
Productivity and Quality of Multi-product Firms
This paper introduces a method for estimating productivity and quality at the firm-product level using a transformation function framework. We use firm optimization conditions to establish a one-to-one mapping between observed data and unobserved productivity and quality. We do not need to impute firm-product input shares and can avoid imposing productivity evolution processes. The method is scalable to numerous products and can address the bias caused by unobserved heterogeneous intermediate input prices. We apply the method to a set of Mexican manufacturing industries and examine the roles ...