Structural Change Within Versus Across Firms: Evidence from the United States
June 2022
Working Paper Number:
CES-22-19
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 irms 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.
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:
production,
macroeconomic,
manufacturing,
industrial,
sale,
productivity growth,
growth,
organizational,
employ,
monopolistic,
sector,
recession,
firms grow,
industry employment,
employment growth,
establishment,
innovation,
industry variation,
growth employment,
outsourced
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:
Census of Manufactures,
Standard Industrial Classification,
Center for Economic Studies,
Ordinary Least Squares,
National Bureau of Economic Research,
Bureau of Economic Analysis,
IBM,
Business Services,
Longitudinal Business Database,
Retail Trade,
Census of Manufacturing Firms,
Economic Census,
Department of Homeland Security,
Wholesale Trade,
North American Industry Classification System,
Information and Communication Technology Survey,
Technical Services,
Public Administration,
Harmonized System,
Census Bureau Disclosure Review Board,
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