The Life Cycle of Plants in India and Mexico
September 2012
Working Paper Number:
CES-12-20
Abstract
In the U.S., the average 40 year old plant employs almost eight times as many workers as the typical plant five years or younger. In contrast, surviving Indian plants exhibit little growth in terms of either employment or output. Mexico is intermediate to India and the U.S. in these respects: the average 40 year old Mexican plant employs twice as many workers as an average new plant. This pattern holds across many industries and for formal and informal establishments alike. The divergence in plant dynamics suggests lower investments by Indian and Mexican plants in process efficiency, quality, and in accessing markets at home and abroad. In simple GE models, we find that the difference in life cycle dynamics could lower aggregate manufacturing productivity on the order of 25% in India and Mexico relative to the U.S.
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
profitability,
investment,
production,
manufacturing,
growth,
employ,
labor,
produce,
efficiency,
factory,
mexican,
producing,
agriculture,
profit,
consumption,
plant productivity,
productivity plants,
productivity dispersion,
plant employment,
fiscal,
manufacturing plants,
manufacturing productivity
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Center for Economic Studies,
Total Factor Productivity,
National Employer Survey,
Economic Census,
TFPQ
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with 🔥 are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'The Life Cycle of Plants in India and Mexico' are listed below in order of similarity.
-
Working PaperMisallocation and Manufacturing TFP in China and India🔥
February 2009
Working Paper Number:
CES-09-04
Resource misallocation can lower aggregate total factor productivity (TFP). We use micro data on manufacturing establishments to quantify the potential extent of misallocation in China and India compared to the U.S. Compared to the U.S., we measure sizable gaps in marginal products of labor and capital across plants within narrowly-defined industries in China and India. When capital and labor are hypothetically reallocated to equalize marginal products to the extent observed in the U.S., we calculate manufacturing TFP gains of 30-50% in China and 40-60% in India.View Full Paper PDF
-
Working PaperThe Reallocation Myth
April 2018
Working Paper Number:
CES-18-19
There is a widely held view that much of growth in the U.S. can be attributed to reallocation from low to high productivity firms, including from exiting firms to entrants. Declining dynamism ' falling rates of reallocation and entry/exit in the U.S. ' have therefore been tied to the lackluster growth since 2005. We challenge this view. Gaps in the return to resources do not appear to have narrowed, suggesting that allocative efficiency has not improved in the U.S. in recent decades. Reallocation can also matter if it is a byproduct of innovation. However, we present evidence that most innovation comes from existing firms improving their own products rather than from entrants or fast-growing firms displacing incumbent firms. Length: 26 pagesView Full Paper PDF
-
Working PaperHow Destructive is Innovation?
January 2017
Working Paper Number:
CES-17-04
Entrants and incumbents can create new products and displace the products of competitors. Incumbents can also improve their existing products. How much of aggregate productivity growth occurs through each of these channels? Using data from the U.S. Longitudinal Business Database on all non-farm private businesses from 1976'1986 and 2003'2013, we arrive at three main conclusions: First, most growth appears to come from incumbents. We infer this from the modest employment share of entering firms (defined as those less than 5 years old). Second, most growth seems to occur through improvements of existing varieties rather than creation of brand new varieties. Third, own-product improvements by incumbents appear to be more important than creative destruction. We infer this because the distribution of job creation and destruction has thinner tails than implied by a model with a dominant role for creative destruction.View Full Paper PDF
-
Working PaperMisallocation or Mismeasurement?
February 2020
Working Paper Number:
CES-20-07
The ratio of revenue to inputs differs greatly across plants within countries such as the U.S. and India. Such gaps may reflect misallocation which hinders aggregate productivity. But differences in measured average products need not reflect differences in true marginal products. We propose a way to estimate the gaps in true marginal products in the presence of measurement error. Our method exploits how revenue growth is less sensitive to input growth when a plant's average products are overstated by measurement error. For Indian manufacturing from 1985'2013, our correction lowers potential gains from reallocation by 20%. For the U.S. the effect is even more dramatic, reducing potential gains by 60% and eliminating 2/3 of a severe downward trend in allocative efficiency over 1978'2013.View Full Paper PDF
-
Working PaperMissing Growth from Creative Destruction
April 2018
Working Paper Number:
CES-18-18
Statistical agencies typically impute inflation for disappearing products based on surviving products, which may result in overstated inflation and understated growth. Using U.S. Census data, we apply two ways of assessing the magnitude of 'missing growth' for private nonfarm businesses from 1983'2013. The first approach exploits information on the market share of surviving plants. The second approach applies indirect inference to firm-level data. We find: (i) missing growth from imputation is substantial ' at least 0.6 percentage points per year; and (ii) most of the missing growth is due to creative destruction (as opposed to new varieties).View Full Paper PDF
-
Working PaperDoes Higher Productivity Dispersion Imply Greater Misallocation?A Theoretical and Empirical Analysis
January 2016
Working Paper Number:
CES-16-42
Recent research maintains that the observed variation in productivity within industries reflects resource misallocation and concludes that large GDP gains may be obtained from market-liberalizing polices. Our theoretical analysis examines the impact on productivity dispersion of reallocation frictions in the form of costs of entry, operation, and restructuring, and shows that reforms reducing these frictions may raise dispersion of productivity across firms. The model does not imply a negative relationship between aggregate productivity and productivity dispersion. Our empirical analysis focuses on episodes of liberalizing policy reforms in the U.S. and six East European transition economies. Deregulation of U.S. telecommunications equipment manufacturing is associated with increased, not reduced, productivity dispersion, and every transition economy in our sample shows a sharp rise in dispersion after liberalization. Productivity dispersion under central planning is similar to that in the U.S., and it rises faster in countries adopting faster paces of liberalization. Lagged productivity dispersion predicts higher future productivity growth. The analysis suggests there is no simple relationship between the policy environment and productivity dispersion.View Full Paper PDF
-
Working PaperWhat Drives Stagnation: Monopsony or Monopoly?
October 2022
Working Paper Number:
CES-22-45
Wages for the vast majority of workers have stagnated since the 1980s while productivity has grown. We investigate two coexisting explanations based on rising market power: 1. Monopsony, where dominant firms exploit the limited mobility of their own workers to pay lower wages; and 2. Monopoly, where dominant firms charge too high prices for what they sell, which lowers production and the demand for labor, and hence equilibrium wages economy-wide. Using establishment data from the US Census Bureau between 1997 and 2016, we find evidence of both monopoly and monopsony, where the former is rising over this period and the latter is stable. Both contribute to the decoupling of productivity and wage growth, with monopoly being the primary determinant: in 2016 monopoly accounts for 75% of wage stagnation, monopsony for 25%.View Full Paper PDF
-
Working PaperAre We Undercounting Reallocation's Contribution to Growth?
January 2013
Working Paper Number:
CES-13-55R
There has been a strong surge in aggregate productivity growth in India since 1990, following significant economic reforms. Three recent studies have used two distinct methodologies to decompose the sources of growth, and all conclude that it has been driven by within-plant increases in technical efficiency and not between-plant reallocation of inputs. Given the nature of the reforms, where many barriers to input reallocation were removed, this finding has surprised researchers and been dubbed 'India's Mysterious Manufacturing Miracle.' In this paper, we show that the methodologies used may artificially understate the extent of reallocation. One approach, using growth in value added, counts all reallocation growth arising from the movement of intermediate inputs as technical efficiency growth. The second approach, using the Olley-Pakes decomposition, uses estimates of plant-level total factor productivity (TFP) as a proxy for the marginal product of inputs. However, in equilibrium, TFP and the marginal product of inputs are unrelated. Using microdata on manufacturing from five countries ' India, the U.S., Chile, Colombia, and Slovenia ' we show that both approaches significantly understate the true role of reallocation in economic growth. In particular, reallocation of materials is responsible for over half of aggregate Indian manufacturing productivity growth since 2000, substantially larger than either the contribution of primary inputs or the change in the covariance of productivity and size.View Full Paper PDF
-
Working PaperManagement in America
January 2013
Working Paper Number:
CES-13-01
The Census Bureau recently conducted a survey of management practices in over 30,000 plants across the US, the first large-scale survey of management in America. Analyzing these data reveals several striking results. First, more structured management practices are tightly linked to better performance: establishments adopting more structured practices for performance monitoring, target setting and incentives enjoy greater productivity and profitability, higher rates of innovation and faster employment growth. Second, there is a substantial dispersion of management practices across the establishments. We find that 18% of establishments have adopted at least 75% of these more structured management practices, while 27% of establishments adopted less than 50% of these. Third, more structured management practices are more likely to be found in establishments that export, who are larger (or are part of bigger firms), and have more educated employees. Establishments in the South and Midwest have more structured practices on average than those in the Northeast and West. Finally, we find adoption of structured management practices has increased between 2005 and 2010 for surviving establishments, particularly for those practices involving data collection and analysis.View Full Paper PDF
-
Working PaperEntry, Growth, and the Business Environment: A Comparative Analysis of Enterprise Data from the U.S. and Transition Economies
September 2010
Working Paper Number:
CES-10-20
What role does new firm entry play in economic growth? Are entrants and young firms more or less productive than incumbents, and how are their relative productivity dynamics affected by financial constraints and the business environment? This paper uses comprehensive manufacturing firm data from seven economies (United States, Georgia, Hungary, Lithuania, Romania, Russia, and Ukraine) to measure new firm entry and the productivity dynamics of entrants relative to incumbents in the same industries. We contrast hypotheses based on 'leapfrogging,' in which entrants embody superior productivity, with an 'experimentation' approach, in which entrants face uncertainty and incumbents can innovate. The results imply that leapfrogging is typical of early and incomplete transition, but experimentation better characterizes both the US and mature transition economies. Improvements in financial markets and the business environment tend to raise both the entry rate and productivity growth, but they are associated with negative relative productivity of entrants and smaller contributions of reallocation to growth among both entrants and incumbents.View Full Paper PDF
