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Structural Change Within versus Across Firms: Evidence from the United States

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  • Xiang Ding
  • Teresa C. Fort
  • Stephen J. Redding
  • Peter K. Schott

Abstract

We document the role of intangible capital in manufacturing firms' substantial contribution to non-manufacturing employment growth from 1977-2019. Exploiting data on firms' "auxiliary" establishments, we develop a novel measure of proprietary in-house knowledge and show that it is associated with increased growth and industry switching. We rationalize this reallocation in a model where firms combine physical and knowledge inputs as complements, and where producing the latter in-house confers a sector-neutral productivity advantage facilitating within-firm structural transformation. Consistent with the model, manufacturing firms with auxiliary employment pivot towards services in response to a plausibly exogenous decline in their physical input prices.

Suggested Citation

  • Xiang Ding & Teresa C. Fort & Stephen J. Redding & Peter K. Schott, 2022. "Structural Change Within versus Across Firms: Evidence from the United States," NBER Working Papers 30127, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30127
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    Cited by:

    1. Justin R. Pierce & Peter K. Schott & Cristina Tello-Trillo, 2022. "Trade Liberalization and Labor-Market Outcomes: Evidence from US Matched Employer-Employee Data," Working Papers 22-42, Center for Economic Studies, U.S. Census Bureau.
    2. Magli, Martina, 2022. "The Spillover Effect of Services Offshoring on Local Labour Markets," Rationality and Competition Discussion Paper Series 351, CRC TRR 190 Rationality and Competition.
    3. Stephen J. Redding, 2020. "Trade and Geography," NBER Working Papers 27821, National Bureau of Economic Research, Inc.
    4. Chen, Natalie & Novy, Dennis & Perroni, Carlo & Wong, Horng Chern, 2023. "Urban-biased structural change," LSE Research Online Documents on Economics 121286, London School of Economics and Political Science, LSE Library.
    5. Gregor Singer, 2024. "Complementary Inputs and Industrial Development: Can Lower Electricity Prices Improve Energy Efficiency?," CESifo Working Paper Series 10944, CESifo.
    6. Teresa C. Fort, 2023. "The Changing Firm and Country Boundaries of US Manufacturers in Global Value Chains," Working Papers 23-38, Center for Economic Studies, U.S. Census Bureau.
    7. Kox, Henk L.M., 2022. "A micro-macro model of foreign direct investment: knowledge-based gravity forces, self-selection and third-country effects," MPRA Paper 115542, University Library of Munich, Germany.
    8. Fariha Kamal & Jessica McCloskey & Wei Ouyang, 2022. "Multinational Firms in the U.S. Economy: Insights from Newly Integrated Microdata," Working Papers 22-39, Center for Economic Studies, U.S. Census Bureau.
    9. Xiang Ding, 2023. "Industry Linkages from Joint Production," Working Papers 23-02, Center for Economic Studies, U.S. Census Bureau.
    10. Francesco Bripi & Raffaello Bronzini & Elena Gentili & Andrea Linarello & Elisa Scarinzi, 2022. "Structural change and firm dynamics in the south of Italy," Questioni di Economia e Finanza (Occasional Papers) 676, Bank of Italy, Economic Research and International Relations Area.
    11. Lorenz K.F. Ekerdt & Kai-Jie Wu, 2024. "The Rise of Specialized Firms," Working Papers 24-06, Center for Economic Studies, U.S. Census Bureau.
    12. Martina Magli, 2022. "The spillover effect of services offshoring on local labour markets," CEP Discussion Papers dp1892, Centre for Economic Performance, LSE.
    13. Magli, Martina, 2022. "The spillover effect of services offshoring on local labour markets," LSE Research Online Documents on Economics 118048, London School of Economics and Political Science, LSE Library.
    14. Fariha Kamal & Jessica McCloskey & Wei Ouyang, 2022. "Multinational Firms in the U.S. Economy: Insights from Newly Integrated Microdata," BEA Working Papers 0202, Bureau of Economic Analysis.

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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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