Papers written by Author(s): 'Nicolas Vincent'
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Working PaperGood Dispersion, Bad Dispersion
March 2024
Working Paper Number:
CES-24-13
We document that most dispersion in marginal revenue products of inputs occurs across plants within firms rather than between firms. This is commonly thought to reflect misallocation: dispersion is 'bad.' However, we show that eliminating frictions hampering internal capital markets in a multi-plant firm model may in fact increase productivity dispersion and raise output: dispersion can be 'good.' This arises as firms optimally stagger investment activity across their plants over time to avoid raising costly external finance, instead relying on reallocating internal funds. The staggering in turn generates dispersion in marginal revenue products. We use U.S. Census data on multi-plant manufacturing firms to provide empirical evidence for the model mechanism and show a quantitatively important role for good dispersion. Since there is less scope for good dispersion in emerging economies, the difference in the degree of misallocation between emerging and developed economies looks more pronounced than previously thought.View Full Paper PDF
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Working PaperThe Micro-Level Anatomy of the Labor Share Decline
March 2020
Working Paper Number:
CES-20-12
The labor share in U.S. manufacturing declined from 62 percentage points (ppts) in 1967 to 41 ppts in 2012. The labor share of the typical U.S. manufacturing establishment, in contrast, rose by over 3 ppts during the same period. Using micro-level data, we document five salient facts: (1) since the 1980s, there has been a dramatic reallocation of value added toward the lower end of the labor share distribution; (2) this aggregate reallocation is not due to entry/exit, to 'superstars" growing faster or to large establishments lowering their labor shares, but is instead due to units whose labor share fell as they grew in size; (3) low labor share (LL) establishments benefit from high revenue labor productivity, not low wages; (4) they also enjoy a product price premium relative to their peers, pointing to a significant role for demand-side forces; and (5) they have only temporarily lower labor shares that rebound after five to eight years. This transient pattern has become more pronounced over time, and the dynamics of value added and employment are increasingly disconnected.View Full Paper PDF
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Working PaperDo Firms Mitigate or Magnify Capital Misallocation? Evidence from Plant-Level Data
January 2017
Working Paper Number:
CES-17-14
Almost two thirds of the cross-plant dispersion in marginal revenue products of capital occurs across plants within the same firm rather than between firms. Even though firms allocate investment very differently across their plants, they do not equalize marginal revenue products across their plants. We reconcile these findings in a model of multi-plant firms, physical adjustment costs and credit constraints. Credit constrained multi-plant firms can utilize internal capital markets by concentrating internal funds on investment projects in only a few of their plants in a given period and rotating funds to another set of plants in the future. The resulting increase in within-firm dispersion of marginal revenue products of capital is hence not a symptom of misallocation within the firm, but rather actions taken by the firm to mitigate external credit constraints and adjustment costs of capital. Economies with multi-plant firms produce more aggregate output despite higher dispersion in marginal revenue products of capital compared to economies with single-plant firms. Because emerging economies are predominantly populated by single-plant firms, the gains from reducing their distortions to the level of developed are larger than previously thought.View Full Paper PDF
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Working PaperDisentangling Labor Supply and Demand Shifts Using Spatial Wage Dispersion: The Case of Oil Price Shocks
November 2013
Working Paper Number:
CES-13-57
We separate changes in labor supply and demand through changes in higher-order moments of the wage distribution. We illustrate this idea in a study of the effects of oil price shocks, which generate a predictable labor demand adjustment across regions. Empirically, oil price shocks decrease average wages, particularly skilled wages, and increase wage dispersion, particularly unskilled wage dispersion. In a model with spatial energy intensity differences and nontradables, labor demand shifts, while explaining the response of average wages to oil price shocks, have counterfactual implications for the response of wage dispersion. Only shifts in labor supply can explain this latter fact.View Full Paper PDF
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Working PaperFinancial Frictions and Investment Dynamics in Multi-Plant Firms
October 2013
Working Paper Number:
CES-13-56
Using confidential Census data on U.S. manufacturing plants, we document that most of the dispersion in investment rates across plants occurs within rms instead of across firms. Between- firm dispersion is almost acyclical, but within- rm dispersion is strongly procyclical. To investigate the role of rms in the allocation of capital in the economy, we build a multi-plant model of the firm with frictions at both levels of aggregation. We show that external nancing constraints at the level of the rm can have important implications for plant-level investment dynamics. Finally, we present empirical evidence supporting the predictions of the model.View Full Paper PDF
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