This paper studies weak identification in control-function estimation of production functions. Control function estimation relies on there being an informative proxy that captures unobserved heterogeneity. We then show that when the proxy carries little signal, it leads to weak identification. Inconsistent estimators with non-normal distribution are the consequences. To address this, we provide practical diagnostics of signal strength and identification-robust inference methods. These procedures remain valid regardless of identification strength and are straightforward to implement for applied work.
This paper develops a dynamic general equilibrium model with heterogeneous firms, capital accumulation, and endogenous entry and exit. Aggregate outcomes depend on the entire distribution of firm states rather than on a representative firm. The framework extends the stylized entry–exit model of Hopenhayn (1992) by incorporating investment dynamics and capital adjustment costs, creating a richer firm block. This structure moves beyond static wedge approaches by providing a structural dynamic mechanism through which misallocation arises and by linking the analysis to micro-econometric estimates. This allows to quantify how frictions generate dispersion in marginal products and translate into aggregate TFP losses using empirical data.
We estimate total factor productivity (TFP) across European countries using MDI data from CompNet. The analysis focuses on productivity growth, the role of misallocation, and systematic cross-country differences. This provides a comparative view of efficiency dynamics across Europe.
Despite the growing importance of digital trade in services, its measurement remains limited, particularly in developing countries. This study builds a database of over 2,600 websites from Argentina, Brazil, Chile, Colombia, Mexico, and Peru, analyzing their business models and functional attributes. Using clustering techniques, it identifies common patterns and typologies of online presence. Results reveal wide heterogeneity within sectors, with most sites generating value through direct sales or intermediation, and little variation across major regional markets. The findings provide insights to inform policies promoting digital trade in services.