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Factor Substitution In U.S. Manufacturing: Does Plant Size Matter

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Author Info
Sang V Nguyen
Mary L Streitwieser

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Abstract

We use micro data for 10,412 U.S. manufacturing plants to estimate the degrees of factor substitution by industry and by plant size. We find that (1) capital, labor, energy and materials are substitutes in production, and (2) the degrees of substitution among inputs are quite similar across plant sizes in a majority of industries. Two important implications of these findings are that (1) small plants are typically as flexible as large plants in factor substitution; consequently, economic policies such energy conservation policies that result in rising energy prices would not cause negative effects on either large or small U.S. manufacturing plants; and (2) since energy and capital are found to be substitutes; the 1973 energy crisis is unlikely to be a significant factor contributing to the post 1973 productivity slowdown. of Substitution

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File URL: http://www.ces.census.gov/index.php/ces/cespapers?down_key=100264
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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 98-6.

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Date of creation: Apr 1998
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Handle: RePEc:cen:wpaper:98-6

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Keywords: CES; economic; research; micro; data; microdata; chief; economist;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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  19. McFadden, Daniel, 1978. "The General Linear Profit Function," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 5 McMaster University Archive for the History of Economic Thought. [Downloadable!]
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    Other versions:
  28. Solow, John L, 1987. "The Capital-Energy Complementarity Debate Revisited," American Economic Review, American Economic Association, vol. 77(4), pages 605-14, September. [Downloadable!] (restricted)
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  1. Suho Bae, 2009. "The responses of manufacturing businesses to geographical differences in electricity prices," The Annals of Regional Science, Springer, vol. 43(2), pages 453-472, June. [Downloadable!] (restricted)
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