Productivity Dispersion: Facts, Theory, and Implications

TL;DR

This paper investigates productivity disparities across workers, firms, and sectors, revealing Pareto distribution patterns and proposing a physics-inspired model incorporating demand fluctuations to explain these phenomena.

Contribution

It introduces a novel theoretical framework based on superstatistics to explain productivity dispersion and its dependence on aggregation levels.

Findings

Productivity dispersions follow Pareto laws across different levels.

The Pareto index decreases with higher levels of aggregation.

A superstatistics-based model explains the observed stylized facts.

Abstract

We study productivity dispersions across workers, firms and industrial sectors. Empirical study of the Japanese data shows that they all obey the Pareto law, and also that the Pareto index decreases with the level of aggregation. In order to explain these two stylized facts, we propose a theoretical framework built upon the basic principle of statistical physics. In this framework, we employ the concept of superstatistics which accommodates fluctuations of aggregate demand.