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

Author

Listed:
  • 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.

Suggested Citation

  • Allan Collard-Wexler & Jan De Loecker, 2012. "Reallocation and Technology: Evidence from the U.S. Steel Industry," Working Papers 1402, Princeton University, Department of Economics, Center for Economic Policy Studies..
  • Handle: RePEc:pri:cepsud:230
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    More about this item

    Keywords

    Productivity; Technology; Competition; United States;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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