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Structural change in Finnish manufacturing: The theory of the aggregation of production functions and an empirical analysis with a plant-level panel

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  • Sauramo, Pekka
  • Maliranta, Mika

Abstract

In this paper, structural change in the Finnish manufacturing industries is studied using the theory of the aggregation of production functions and longitudinal plant-level data for the period from 1980 to 2005. To characterise the nature of structural change in 12 industries, we examine the invariance of aggregate production functions over time. Aggregate production functions need not be estimated because, according to the theory of the aggregation of production functions, the invariance can be analysed by investigating the stability of capacity density functions, which describe the distribution of value added in these industries. Even though the shapes of aggregate production functions alter over time in most industries, there are differences in timing and in the degree of turbulence across industries. The analysis confirms that in some industries (e.g., the paper industry) the late 1980s marked the beginning of a period of relatively strong structural change. The food and communications equipment manufacturing industries are examples of industries for which the 1990s was a period of turbulence.

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Bibliographic Info

Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 22 (2011)
Issue (Month): 2 (June)
Pages: 116-134

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Handle: RePEc:eee:streco:v:22:y:2011:i:2:p:116-134

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Web page: http://www.elsevier.com/locate/inca/525148

Related research

Keywords: Technological change Structural change Aggregation theory Production function Beta regression;

References

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  1. Silvia Ferrari & Francisco Cribari-Neto, 2004. "Beta Regression for Modelling Rates and Proportions," Journal of Applied Statistics, Taylor & Francis Journals, vol. 31(7), pages 799-815.
  2. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-68, December.
  3. Jesus Felipe & Franklin M. Fisher, 2003. "Aggregation in Production Functions: What Applied Economists should Know," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 208-262, 05.
  4. Charles I. Jones, 2005. "The Shape of Production Functions and the Direction of Technical Change," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 517-549, May.
  5. Robert M. Solow, 1967. "Some Recent Developments in the Theory of Production," NBER Chapters, in: The Theory and Empirical Analysis of Production, pages 25-54 National Bureau of Economic Research, Inc.
  6. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
  7. Fisher, Franklin M, 1969. "The Existence of Aggregate Production Functions," Econometrica, Econometric Society, vol. 37(4), pages 553-77, October.
  8. Fisher, Franklin M, 1969. "Approximate Aggregation and the Leontief Conditions," Econometrica, Econometric Society, vol. 37(3), pages 457-69, July.
  9. Caballero, Ricardo J & Hammour, Mohamad L, 1996. "On the Timing and Efficiency of Creative Destruction," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 805-52, August.
  10. Hyytinen, Ari & Maliranta, Mika, 2011. "Firm Lifecycles and External Restructuring," Discussion Papers 1253, The Research Institute of the Finnish Economy.
  11. Ricardo J. Caballero, 2007. "Specificity and the Macroeconomics of Restructuring," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033623, December.
  12. Jens J. Kr├╝ger, 2008. "Productivity And Structural Change: A Review Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 22(2), pages 330-363, 04.
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