Essays on Firm Growth, Productivity, and Profits

Jason McCormack, Fordham University


In 2014, the manufacturing sector accounted for only 15% of the value added to world GDP though due to its job-creating potential, policy makers have recently begun to focus on expanding the manufacturing sector in developing nations. Despite this, little is known about the extent to which firms in developing nations can recover from shocks. This paper examines the long-term consequences of transitory shocks on measures of profits and productivity using data on manufacturing firms in Ghana. That is, using longitudinal data we measure the extent to which firms can recover from past shocks on profits and productivity, also known as path dependence, or, "catch-up". Using OLS, Arellano-Bond, Arellano-Bover, and system-GMM estimates, we find that, profits, the real value of output per capita, and the real replacement value of capita per capita experience significant path dependence. More specifically, we find past realizations account for approximately 51%, 64%, and 61% of today's profit, output per capita, and replacement values of capital per capita, respectively. These findings add to a small but growing body of literature on the role of transitory shocks on firm profits and productivity.

Subject Area

Economic theory

Recommended Citation

McCormack, Jason, "Essays on Firm Growth, Productivity, and Profits" (2017). ETD Collection for Fordham University. AAI10278413.