Measuring productivity (Identifying productivity when it is a factor of production)

Measuring productivity, how much a production plant produces for a fixed set of inputs, is a difficult problem. It is difficult because more productive plants demand different levels of the factors of production (labor, capital, materials, etc). The relationship between output and inputs alone does not reveal productivity. Standard approaches to solve this problem require a heavy dose of theory — much of which is more about assumptions needed to estimate the model and less about robust predictions from economic theory. This paper derives a robust prediction from economic theory and shows how to use it to learn how productivity varies across plants with only weak assumptions.

Check it out: https://zflynn.com/papers/pit_zf.pdf