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The Dynamics of Plant-level Productivity in U.S. Manufacturing

Author

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  • Kirk White
  • Arpad Abraham

Abstract

Recent work in I.O. has emphasized the importance of firm- and plant-level heterogeneity in total factor productivity. Jensen and McGuckin (1996) argue that the major empirical regularity in studies of firm or establishment level productivity is heterogeneity within sectors and across plant characteristics. In a seminal paper, Olley and Pakes (1996) presented an econometric method for estimating establishment-level productivity taking into account selection issues. This paper extends Olley and Pakes in two directions. First, instead of focusing on the single industry, this paper applies the Levinsohn-Petrin (1999) modification of the Olley-Pakes methodology to estimate plant-level productivity across many industries. This is made possible by use of a unique plant-level dataset that covers all industries in the U.S. manufacturing sector. Second, while Olley and Pakes were interested in the dynamics of productivity, they focused on measuring year-by-year or multi-year average productivity within an industry. This paper augments their approach by estimating an establishment-level idiosyncratic productivity process.

Suggested Citation

  • Kirk White & Arpad Abraham, 2004. "The Dynamics of Plant-level Productivity in U.S. Manufacturing," Computing in Economics and Finance 2004 332, Society for Computational Economics.
  • Handle: RePEc:sce:scecf4:332
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    References listed on IDEAS

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    1. Kjetil Storesletten & Chris Telmer & Amir Yaron, 2007. "Asset Pricing with Idiosyncratic Risk and Overlapping Generations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 519-548, October.
    2. Sakellaris, Plutarchos, 2004. "Patterns of plant adjustment," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 425-450, March.
    3. Douglas W Dwyer, 1996. "ARE FIXED EFFECTS FIXED? Persistence in Plant Level Productivity," Working Papers 96-3, Center for Economic Studies, U.S. Census Bureau.
    4. Levinsohn, J. & Petrin, A., 1999. "When Industries Become More Productive, Do Firms?: Investigating Productivity Dynamics," Working Papers 445, Research Seminar in International Economics, University of Michigan.
    5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    6. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
    7. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    8. repec:fth:michin:445 is not listed on IDEAS
    9. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    10. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau.
    11. Laura Power, 1998. "The Missing Link: Technology, Investment, And Productivity," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 300-313, May.
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    Cited by:

    1. Hubert Janicki & Henry Hyatt & Emin Dinlersoz, 2015. "Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets," 2015 Meeting Papers 104, Society for Economic Dynamics.
    2. Yoonsoo Lee & Toshihiko Mukoyama, 2008. "Entry, Exit, and Plant-Level Dynamics over the Business Cycle," Working Papers 08-17, Center for Economic Studies, U.S. Census Bureau.
    3. repec:cen:wpaper:15-08 is not listed on IDEAS
    4. Emi Nakamura & Jón Steinsson, 2010. "Monetary Non-neutrality in a Multisector Menu Cost Model," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 961-1013.
    5. Costas Azariadis & Leo Kaas & Yi Wen, 2016. "Self-Fulfilling Credit Cycles," Review of Economic Studies, Oxford University Press, vol. 83(4), pages 1364-1405.
    6. Rui Castro & Gian Luca Clementi & Yoonsoo Lee, 2015. "Cross Sectoral Variation in the Volatility of Plant Level Idiosyncratic Shocks," Journal of Industrial Economics, Wiley Blackwell, vol. 63(1), pages 1-29, March.
    7. Katherine A. Smith, 2011. "Can Financing Constraints Explain The Asset Pricing Puzzles In Production Economies?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 739-765, August.
    8. Emin Dinlersoz & Henry Hyatt & Sang Nguyen, 2011. "Wage Dynamics along the Life-Cycle of Manufacturing Plants," Working Papers 11-24r, Center for Economic Studies, U.S. Census Bureau, revised Mar 2013.
    9. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    10. Biewen, Martin & Weiser, Constantin, 2011. "A New Approach to Testing Marginal Productivity Theory," IZA Discussion Papers 6113, Institute for the Study of Labor (IZA).
    11. James Costain & Marcel Jansen, 2010. "Employment Fluctuations with Downward Wage Rigidity: The Role of Moral Hazard," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(4), pages 782-811, December.
    12. Valentina Bosetti & Marco Maffezzoli, 2013. "Taxing Carbon under Market Incompleteness," Working Papers 2013.72, Fondazione Eni Enrico Mattei.
    13. Markus Poschke & Alain Gabler, 2011. "Growth through Experimentation," 2011 Meeting Papers 643, Society for Economic Dynamics.
    14. Roberto Steri, 2015. "Collateral-Based Asset Pricing," 2015 Meeting Papers 293, Society for Economic Dynamics.
    15. Šustek, Roman, 2011. "Plant-level nonconvex output adjustment and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 58(4), pages 400-414.
    16. Di Nola, Alessandro, 2015. "Capital Misallocation during the Great Recession," MPRA Paper 68289, University Library of Munich, Germany.
    17. Lee, Yoonsoo & Mukoyama, Toshihiko, 2015. "Productivity and employment dynamics of US manufacturing plants," Economics Letters, Elsevier, vol. 136(C), pages 190-193.
    18. Ryan Michaels & David Ratner & Michael Elsby, 2016. "Labor Market Frictions and Aggregate Employment," 2016 Meeting Papers 770, Society for Economic Dynamics.
    19. Lakshmi Balasubramanyan & Ramesh Mohan, 2010. "How well is productivity being priced?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 34(4), pages 415-429, October.

    More about this item

    Keywords

    productivity dynamics; manufacturing; production functions; selection;

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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