In the mid 1980s, the U.S. cement industry faced a large increase in foreign competition. Foreign cement producers began offering cement at very large discounts on U.S. prices. We show that productivity (measured by TFP) in the industry was falling during the 1960s and 1970s, but that following the increase in competition, productivity has reversed course and is growing strongly. When foreign competition was weak, productivity fell. When it was strong, productivity grew robustly. We explore the reasons for the large productivity increase. We argue that a large share of the productivity gains resulted from significant changes in management practices at plants.
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Accounting for the New Gains from Trade Liberalization
March 2016
Working Paper Number:
CES-16-14
We measure the "new" gains from trade reaped by Canada as a result of the Canada-US Free Trade Agreement (CUSFTA). We think of the "new" gains from trade of a country as all welfare effects pertaining to changes in the set of firms serving that country as emphasized in the so-called "new" trade literature. To this end, we first develop an exact decomposition of the gains from trade which separates "traditional" and "new" gains. We then apply this decomposition using Canadian and US micro data and find that the "new" welfare effects of CUSFTA on Canada were negative.
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Cogeneration Technology Adoption in the U.S.
January 2016
Working Paper Number:
CES-16-30
Well over half of all electricity generated in recent years in Denmark is through cogeneration. In U.S., however, this number is only roughly eight percent. While both the federal and state governments provided regulatory incentives for more cogeneration adoption, the capacity added in the past five years have been the lowest since late 1970s. My goal is to first understand what are and their relative importance of the factors that drive cogeneration technology adoption, with an emphasis on estimating the elasticity of adoption with respect to relative energy input prices and regulatory factors. Very preliminary results show that with a 1 cent increase in purchased electricity price from 6 cents (roughly current average) to 7 cents per kwh, the likelihood of cogeneration technology adoption goes up by about 0.7-1 percent. Then I will try to address the general equilibrium effect of cogeneration adoption in the electricity generation sector as a whole and potentially estimate some key parameters that the social planner would need to determine the optimal cogeneration investment amount. Partial equilibrium setting does not consider the decrease in investment in the utilities sector when facing competition from the distributed electricity generators, and therefore ignore the effects from the change in equilibrium price of electricity. The competitive market equilibrium setting does not consider the externality in the reduction of CO2 emissions, and leads to socially sub-optimal investment in cogeneration. If we were to achieve the national goal to increase cogeneration capacity half of the current capacity by 2020, the US Department of Energy (DOE) estimated an annual reduction of 150 million metric tons of CO2 annually ' equivalent to the emissions from over 25 million cars. This is about five times the annual carbon reduction from deregulation and consolidation in the US nuclear power industry (Davis, Wolfram 2012). Although the DOE estimates could be an overly optimistic estimate, it nonetheless suggests the large potential in the adoption of cogeneration technology.
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Customer-Employee Substitution: Evidence from Gasoline Stations*
January 2015
Working Paper Number:
CES-15-45R
We document the adoption of self-service pumps in U.S. gasoline stations from 1977 to 1992. Using establishment-level data from the Census of Retail Trade over this period, we show that self-service stations employ approximately one quarter fewer attendants per pump, all else equal. The work done by these attendants has shifted to customers, biasing upwards conventional measures of productivity growth.
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Entry Costs and Increasing Trade
December 2011
Working Paper Number:
CES-11-38R
Using confidential microdata from the US Census, we find that the fraction of manufacturing plants that export rose from 21% in 1987 to 39% in 2006. It has been suggested that similar trends in other countries may have been caused by declining costs of entering foreign markets. Our study tests this hypothesis for the first time. Both reduced form and structural estimation approaches find little evidence that entry costs declined significantly for US firms over this period. Despite the large literature on changes in variable costs to trade such as tariffs, our estimations represent the first analysis of how the costs of entering foreign markets have changed over time.
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Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown
January 2017
Working Paper Number:
CES-17-17
A large literature documents declining measures of business dynamism including high-growth young firm activity and job reallocation. A distinct literature describes a slowdown in the pace of aggregate labor productivity growth. We relate these patterns by studying changes in productivity growth from the late 1990s to the mid 2000s using firm-level data. We find that diminished allocative efficiency gains can account for the productivity slowdown in a manner that interacts with the within firm productivity growth distribution. The evidence suggests that the decline in dynamism is reason for concern and sheds light on debates about the causes of slowing productivity growth.
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Competition, Productivity, and Survival of Grocery Stores in the Great Depression
April 2018
Working Paper Number:
CES-18-24
We study the grocery industry in Washington, DC, during the Great Depression using data from the 1929 Census of Distribution, a 1929'1930 survey by the Federal Trade Commission, and a 1935 business directory. We first document the differences between chains and independents in the Washington, DC, grocery market circa 1929 to better understand chains' competitive advantages. Second, we study correlates of survival from 1929 to 1935, a period of major contraction and upheaval. We find that more productive stores survived at higher rates, as did stores with greater assortment and lower prices. Presaging the supermarket revolution, combination stores were much more likely to survive to 1935 than other grocery formats.
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Pirate's Treasure
January 2017
Working Paper Number:
CES-17-51
Do countries that improve their protection of intellectual property rights gain access to new product varieties from technologically advanced countries? We build the first comprehensive matched firm level data set on exports and patents using confidential microdata from the US Census to address this question. Across several different estimation approaches we find evidence that these protections affect where US firms export.
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Raising the Barcode Scanner: Technology and Productivity in the Retail Sector
May 2011
Working Paper Number:
CES-11-16R
Barcodes and barcode scanners transformed the grocery industry in the 1970s. I use store-level data from the 1972, 1977, and 1982 Census of Retail Trade, matched to data on store scanner installations, to estimate scanners' effect on labor productivity. I find that early scanners increased a store's labor productivity, on average, by approximately 4.5 percent in the first few years. The effect was larger in stores carrying more packaged products, consistent with the presence of network externalities. Short-run gains were small relative to fixed costs, suggesting that the impediment to widespread adoption of the new technology was profitability, not coordination problems.
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ENTREPRENEURSHIP AND URBAN GROWTH:AN EMPIRICAL ASSESSMENT WITH HISTORICAL MINES
April 2013
Working Paper Number:
CES-13-15
Measures of entrepreneurship, such as average establishment size and the prevalence of start-ups, correlate strongly with employment growth across and within metropolitan areas, but the endogeneity of these measures bedevils interpretation. Chinitz (1961) hypothesized that coal mines near Pittsburgh led that city to specialization in industries, like steel, with significant scale economies and that those big firms led to a dearth of entrepreneurial human capital across several generations. We test this idea by looking at the spatial location of past mines across the United States: proximity to historical mining deposits is associated with bigger firms and fewer start-ups in the middle of the 20th century. We use mines as an instrument for our entrepreneurship measures and find a persistent link between entrepreneurship and city employment growth; this connection works primarily through lower employment growth of start- ups in cities that are closer to mines. These effects hold in cold and warm regions alike and in industries that are not directly related to mining, such as trade, finance and services. We use quantile instrumental variable regression techniques and identify mostly homogeneous effects throughout the conditional city growth distribution.
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The Trend to Smaller Producers in Manufacturing in Canada and the U.S.
March 2002
Working Paper Number:
CES-02-06
This paper examines the trend in the importance of small producers in the Canadian and U.S. manufacturing sectors from the early 1970s to the late 1990s in order to investigate whether there was a common North American trend in changes in plant size. It finds that small plants in both countries increased their share of employment up to the 1990s, but their share remained stable in the 1990s. Small plants increased their share of output up to the 1990s, but then saw their share of output decline. Over the entire time period, their share of output increased less than their share of employment and, therefore, their relative labour productivity has fallen. The similarity in the trends in the two countries suggests that causes of this phenomenon should be sought in similarities such as the technological environment rather than in country-specific factors like unionization or trade intensities.
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