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

Author

Listed:
  • 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
    Note: DAE EFG IO ITI PR
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    Citations

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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. Sen, A., 2024. "Structural Change at a Disaggregated Level: Sectoral Heterogeneity Matters," Cambridge Working Papers in Economics 2415, Faculty of Economics, University of Cambridge.
    3. Martina Magli, 2022. "The spillover effect of services offshoring on local labour markets," CEP Discussion Papers dp1892, Centre for Economic Performance, LSE.
    4. repec:cam:camjip:2410 is not listed on IDEAS
    5. Stephen J. Redding, 2020. "Trade and Geography," NBER Working Papers 27821, National Bureau of Economic Research, Inc.
    6. 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.
    7. repec:ces:ceswps:_10944 is not listed on IDEAS
    8. 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.
    9. 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.
    10. Bripi, Francesco & Bronzini, Raffaello & Gentili, Elena & Linarello, Andrea & Scarinzi, Elisa, 2024. "Structural change and firm dynamics in Southern Italy," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 678-691.
    11. 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.
    12. Xiang Ding, 2023. "Industry Linkages from Joint Production," Working Papers 23-02, Center for Economic Studies, U.S. Census Bureau.
    13. Fernando Leibovici & David Wiczer, 2023. "Firm Exit and Liquidity: Evidence from the Great Recession," Opportunity and Inclusive Growth Institute Working Papers 074, Federal Reserve Bank of Minneapolis.
    14. 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.
    15. 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.
    16. Aaron Flaaen & Fariha Kamal & Eunhee Lee & Kei-Mu Yi, 2024. "An Anatomy of U.S. Establishments’ Trade Linkages in Global Value Chains," Working Papers 2419, Federal Reserve Bank of Dallas.
    17. Greenland, Andrew & Ion, Mihai & Lopresti, John & Schott, Peter K., 2024. "Using equity market reactions to infer exposure to trade liberalization," Journal of International Economics, Elsevier, vol. 152(C).
    18. Singer, Gregor, 2024. "Complementary inputs and industrial development can lower electricity prices improve energy efficiency?," LSE Research Online Documents on Economics 122365, London School of Economics and Political Science, LSE Library.
    19. Nicholas Bloom & Kyle Handley & André Kurmann & Philip A. Luck, 2024. "The China Shock Revisited: Job Reallocation and Industry Switching in U.S. Labor Markets," NBER Working Papers 33098, National Bureau of Economic Research, Inc.

    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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