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Productivity Dynamics with Technology Choice: An Application to Automobile Assembly

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  • Johannes van Biesebroeck

Abstract

During the 1980's, all Japanese automobile producers opened assembly plants in North America. Industry analysts and previous research claim that these transplants are more productive than incumbent plants and that they produce with a substantially different production process. I compare the production processes by estimating a model that allows for heterogeneity in technology and productivity, both of which are intrinsically unobservable. The model is estimated on a panel of assembly plants, controlling for capacity utilization and price effects.The results indicate that the more recent technology uses capital more intensively and it has a higher elasticity of substitution between labour and capital. Hicks-neutral productivity growth is estimated to be lower, while capital-biased (labour-saving) productivity growth is higher for the new technology. Using the estimation results, I decompose industry-wide productivity growth and find plant-level changes in lean plants to be the most important contributor. Plant-level productivity growth is further decomposed to reveal the importance of capital-biased productivity growth, increases in the capital-labour ratio, and returns to scale. Copyright 2003, Wiley-Blackwell.

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Bibliographic Info

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 70 (2003)
Issue (Month): 1 ()
Pages: 167-198

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Handle: RePEc:oup:restud:v:70:y:2003:i:1:p:167-198

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Cited by:
  1. Cynthia Bansak & Norman Morin & Martha Starr, 2003. "Technology, Capital Spending, and Capacity Utilization," Working Papers, San Diego State University, Department of Economics 0010, San Diego State University, Department of Economics.
  2. T. Buchmann & D. Hain & Muhamed Kudic & M. Müller, 2014. "Exploring the Evolution of Innovation Networks in Science-driven and Scale-intensive Industries: New Evidence from a Stochastic Actor-based Approach," IWH Discussion Papers, Halle Institute for Economic Research 1, Halle Institute for Economic Research.
  3. Johannes Van Biesebroeck, 2006. "Complementarities in Automobile Production," NBER Working Papers 12131, National Bureau of Economic Research, Inc.
  4. TAKEDA Yosuke & UCHIDA Ichihiro, 2009. "Technological Externalities and Economic Distance: A case of the Japanese automobile suppliers," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 09051, Research Institute of Economy, Trade and Industry (RIETI).
  5. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 49(2), pages 326-65, June.
  6. Hashmi, Aamir Rafique & Van Biesebroeck, Johannes, 2012. "The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8783, C.E.P.R. Discussion Papers.
  7. John Van Reenen, 2010. "Does Competition Raise Productivity Through Improving Management Quality?," CEP Discussion Papers, Centre for Economic Performance, LSE dp1036, Centre for Economic Performance, LSE.
  8. Allan Collard-Wexler & Jan De Loecker, 2013. "Reallocation and Technology: Evidence from the U.S. Steel Industry," NBER Working Papers 18739, National Bureau of Economic Research, Inc.
  9. Lukach, R. & Kort, P.M. & Plasmans, J.E.J., 2007. "Strategic R&D with Knowledge Spillovers and Endogenous Time to Complete," Discussion Paper, Tilburg University, Center for Economic Research 2007-38, Tilburg University, Center for Economic Research.
  10. Johannes van Biesebroeck, 2002. "The Effect of Technology Choice on Automobile Assembly Plant Productivity," The Economic and Social Review, Economic and Social Studies, Economic and Social Studies, vol. 33(1), pages 65-73.
  11. Ruslan Lukach & Peter M. Kort & Joseph Plasmans, 2005. "Optimal R&D Investment Strategies with Quantity Competition under the Threat of Superior Entry," CESifo Working Paper Series, CESifo Group Munich 1385, CESifo Group Munich.
  12. Ackerberg, Daniel & Caves, Kevin & Frazer, Garth, 2006. "Structural identification of production functions," MPRA Paper 38349, University Library of Munich, Germany.
  13. Hyytinen, Ari & Maliranta, Mika, 2013. "Firm lifecycles and evolution of industry productivity," Research Policy, Elsevier, Elsevier, vol. 42(5), pages 1080-1098.

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