Productivity, Markups and Misallocation
Naples Summer School in Economics and Finance
June 15–16, 2026 · 9:00–12:30 · Università degli Studi di Napoli Federico II
Instructor: Fabiano Schivardi (LUISS and EIEF) · fschivardi@luiss.it
Course description
This is a short PhD course on techniques and issues in the study of firm heterogeneity, with a focus on productivity. The emphasis is on empirical methods, always well grounded in economic theory.
Since the nineties, micro data have shown that the amount of heterogeneity in any economic process is substantial, and this insight has now been embraced well beyond IO: macroeconomics, trade, development, corporate finance and labor all build on models with heterogeneous firms. A recurring lesson of this literature — and the connecting thread of the course — is the importance of measuring firm-level productivity, and on understanding what the available measures actually capture when firms operate in imperfectly competitive markets and we only observe revenues.
The course should be useful to students with general interests: beyond the specific topics, it offers a template for how careful measurement and economic theory discipline each other in empirical work with firm-level data. Below you can find a problem set and a dataset which allow you to apply the techniques disucussed in class.
Format
Four 90-minute lectures, two per day on two consecutive days. I the slides for each lecture are available below. I will present the papers using slides. Students are invited to actively contribute to the discussion with critical engagement.
Lecture 1 — Basic facts and a framework
Stylized facts about firm turnover and productivity dispersion; the Hopenhayn model of industry dynamics: heterogeneity, selection, and the role of productivity.
Lecture 2 — Production function estimation
The simultaneity and selection problems; the control function approach: Olley-Pakes, Levinsohn-Petrin, Ackerberg-Caves-Frazer. What revenue-based TFP actually measures: the omitted price bias and the separation of demand and productivity shocks.
Lecture 3 — Markups
The production approach to markup estimation; the rise of market power in the US; the revenue-data critique and its resolution: what can and cannot be learned about markups from standard production data.
Lecture 4 — Misallocation
The Hsieh-Klenow wedges framework; TFPR dispersion and the aggregate cost of distortions; the adjustment-cost critique; an application to the Italian productivity slowdown. Time permitting, a closing pointer to the debate on declining business dynamism.
Problem set
This problem set and its accompanying data give you the opportunity to practice all the techniques covered in class.