Industry productivity is obtained by aggregation of firm productivities and inclusion of the appropriate allocative efficiency terms, one for each firm.This paper identifies the latter correction terms

The aim of the paper is to measure the efficiency of an industry, and to decompose it into firm efficiencies—which indicate how close firms approximate best practices—and an organization efficiency—which indicates the degree of optimality of the number of firms and their distribution. The...

If more productive firms grow relatively fast, an industry performs better, even when no firm exhibits technical or efficiency change.In other words, the two well-known sources of productivity growth-technology and efficiency-can be augmented by a third one, namely the industrial organization...