Is Firm Productivity Related to Size and Age? The Case of Large Australian Firms

Melbourne Institute Working Paper No. 07/06

Date: March 2006


A. Palangkaraya
A. Stierwald
J. Yong


We investigate the relationship between productivity, size and age of large Australian firms employing more than 100 employees or holding assets in excess of $100 million. In addition, we also investigate the extent of productivity persistence among these firms by looking at transition matrices of productivity distribution and productivity-rank mobility. The empirical study is based on the IBISWorld database used to estimate translog cost function to measure (a residual based) productivity. We find evidence, though somewhat weak, that larger and older firms are on average less productive. Furthermore, we find stronger evidence for a high degree of inertia in terms of productivity ranking within an industry.

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