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st: Demeaning TFP

From   SAM MCCAW <>
Subject   st: Demeaning TFP
Date   Wed, 10 Oct 2012 17:53:52 -0400

Dear All,

I am trying to assess productivity spillovers from foreign to domestic
firms and am using levpet as my productivity estimation technique.

After I run levpet (both on pooled sample and then industry by
industry) I get some gigantic values for lnTFP.

My sample for running levpet includes both domestic and foreign firms,
i.e. I am not running levpet for domestic firms only.

The summary stats for lnTFP are as follows:

    Variable |             Obs        Mean    Std. Dev.       Min        Max
lnTFP_pooled   |     21923   -1247.003    106482.5  -1.43e+07   17.18935
lnTFP_industry |     18710    -5587274    3.56e+08  -4.57e+10   24.17001

Now I would like to demean TFP but since I have so many really high
negative values, would demeaning lnTFP by country and industry just
make it worse?

Also, I am afraid to restrict the sample to a certain level of lnTFP,
for example as far as - 100.

Preferably I would just restrict the sample to exclude outliers but I
have about 3000 firms which have lnTFP less than -50 in a total sample
of 21923.

Also, if I go ahead and use these lnTFP values in my regression, by
elasticity magnitudes turn up to be 4 digits long. Yikes.

I have tried data transformations and so on but am at a loss. Any
thoughts would be greatly appreciated.


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