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

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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

    as
    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. James Levinsohn & Amil Petrin, 1999. "When Industries Become More Productive, Do Firms?," NBER Working Papers 6893, National Bureau of Economic Research, Inc.
    5. 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.
    6. 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.
    7. 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.
    8. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    9. repec:fth:michin:445 is not listed on IDEAS
    10. 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.
    11. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau.
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    More about this item

    Keywords

    productivity dynamics; manufacturing; production functions; selection;
    All these keywords.

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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