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Multi-Product Firms and Product Switching

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  • Andrew Bernard
  • Stephen Redding
  • Peter Schott

Abstract

This paper examines the frequency, pervasiveness and determinants of product switching by U.S. manufacturing firms. We find that one-half of firms alter their mix of five-digit SIC products every five years, that product switching is correlated with both firm- and firm-product attributes, and that product adding and dropping induce large changes in firm scope. The behavior we observe is consistent with a natural generalization of existing theories of industry dynamics that incorporates endogenous product selection within firms. Our findings suggest that product switching contributes to a reallocation of resources within firms towards their most efficient use.

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File URL: ftp://ftp2.census.gov/ces/wp/2008/CES-WP-08-24.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 08-24.

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Length: 50 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:cen:wpaper:08-24

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Keywords: Heterogeneous firms; Product differentiation; Product market entry and exit;

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References

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