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Firm Structure, Multinationals, and Manufacturing Plant Deaths

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  • J. Bradford Jensen
  • Andrew Bernard

Abstract

Plant shutdowns shape industry and aggregate productivity paths and play a major role in the dynamics of employment and industrial restructuring. Plant closures in the U.S. manufacturing sector account for more than half of gross job destruction. While multi-plant firms and multinationals dominate U.S. manufacturing, theoretical and empirical work has largely ignored the role of firms in the plant shutdown decision. This paper examines the effects of firm structure on manufacturing plant closures. Using U.S. data, we find that plants belonging to multi-plant firms are less likely to exit. Similarly, plants owned by U.S. multinationals are less likely to close. However, the superior survival chances are due to the characteristics of the plants themselves rather than the nature of the firms. Controlling for plant and industry attributes that reduce the probability of death, we find that plants owned by multi-unit firms and U.S. multinationals are much more likely to close. A recent change in ownership also increases the chances that a plant will be closed.

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File URL: ftp://ftp2.census.gov/ces/wp/2005/CES-WP-05-18.pdf
File Function: First version, 2005
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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 05-18.

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Length: 27 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:cen:wpaper:05-18

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Keywords: Exit; shutdown; closure; multi-plant firms; multinational firms; takeovers; entry costs; agglomeration; specialization;

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References

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