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The Life Cycle of Plants in India and Mexico

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  • Chang-Tai Hsieh
  • Peter J. Klenow

Abstract

In the U.S., the average 40 year old plant employs almost eight times as many workers as the typical plant five years or younger. In contrast, surviving Indian plants exhibit little growth in terms of either employment or output. Mexico is intermediate to India and the U.S. in these respects: the average 40 year old Mexican plant employs twice as many workers as an average new plant. This pattern holds across many industries and for formal and informal establishments alike. The divergence in plant dynamics suggests lower investments by Indian and Mexican plants in process efficiency, quality, and in accessing markets at home and abroad. In simple GE models, we find that the difference in life cycle dynamics could lower aggregate manufacturing productivity on the order of 25% in India and Mexico relative to the U.S.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18133.

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Date of creation: Jun 2012
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Handle: RePEc:nbr:nberwo:18133

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  1. Chang-Tai Hsieh & Peter J Klenow, 2008. "Misallocation and Manufacturing TFP in China and India," 2008 Meeting Papers 121, Society for Economic Dynamics.
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  21. Virgiliu Midrigan & Daniel Yi Xu, 2014. "Finance and Misallocation: Evidence from Plant-Level Data," American Economic Review, American Economic Association, American Economic Association, vol. 104(2), pages 422-58, February.
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  1. Why do Indian and Mexican plants not grow?
    by Economic Logician in Economic Logic on 2012-10-03 14:11:00
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