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Reallocation and Technology: Evidence from the U.S. Steel Industry

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  • Allan Collard-Wexler

    (New York University)

  • Jan De Loecker

    (Princeton University)

Abstract

This paper studies the role of technology and competition in industry-wide productivity growth. We rely on a unique producer-level dataset covering U.S. steel producers between 1963 and 2002 to measure the impact of a drastic new production technology, the minimill, on aggregate productivity. In addition we trace out its associated impact on productivity and market power through increased competition as measured by the reshuffling of market shares over time and across producers. We provide direct evidence that technological change can itself bring about a process of resource reallocation over a long period of time and lead to substantial productivity growth for the industry as a whole. More specifically, we find that the introduction of a new production technology spurred productivity growth through two channels. First, the entry of minimills lead to a slow but steady drop in the market share of the incumbent technology, the vertically integrated producers. Second, while the new technology started out with a significant productivity premium, by the end of the sample minimills and vertically integrated producers are very similar in terms of efficiency. This catching-up process of the incumbents came about from a large within reallocation of resources among vertically integrated plants.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Center for Economic Policy Studies. in its series Working Papers with number 1402.

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Date of creation: Sep 2012
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Handle: RePEc:pri:cepsud:230deloecker

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Keywords: Productivity; Technology; Competition;

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References

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  1. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-61, July-Aug..
  2. Andrew Bernard & J. Bradford Jensen & Peter Schott, 2003. "Survival of the best fit: exposure to low-wage countries and the (uneven) growth of US manufacturing plants," IFS Working Papers W03/12, Institute for Fiscal Studies.
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Citations

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Cited by:
  1. Jan De Loecker & Pinelopi Koujianou Goldberg, 2014. "Firm Performance in a Global Market," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 201-227, 08.
  2. Amitabh Chandra & Amy Finkelstein & Adam Sacarny & Chad Syverson, 2013. "Healthcare Exceptionalism? Productivity and Allocation in the U.S. Healthcare Sector," NBER Working Papers 19200, National Bureau of Economic Research, Inc.
  3. Allen Tran, 2014. "The Aggregate Impact Of Online Retail," Working Papers 14-23, Center for Economic Studies, U.S. Census Bureau.

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