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Extending Place-Based Innovation Policy to Rural Areas: Using Oaxaca-Blinder Decomposition to Identify Endowment Deficiencies
July 2026
Working Paper Number:
CES-26-48
Place-based policy is premised on the idea that productive investments that address endowment deficiencies may release latent comparative advantages, stimulating growth while reducing regional disparities. Extending place-based policy to the domain of innovation is conceptually challenging given conventional wisdom that settlement size is the principal determinant of agglomeration economies that fuels innovation. However, growing concern that more places are being left behind by the innovation economy has prompted greater interest in ways to expand the geography of innovation. Using confidential firm-level data from the 2018 Annual Business Survey, this study examines differences in self-reported innovation activity between firms in rural and urban counties to identify possible endowment deficiencies. We do this by employing the Oaxaca-Blinder decomposition method to quantify the urban-rural innovation gap to better understand the relative contributions of firm characteristics, owner characteristics, and county-level factors.
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Desperate Capital Breeds Productivity Loss: Evidence From Public Pension Investments in Private Equity
July 2026
Working Paper Number:
CES-26-47
I study investments of U.S. public pensions in private equity (PE), and trace them to ultimate micro assets'target firms which PE funds invest in, using micro-data on private investments combined with confidential U.S. Census data. I show that more severely underfunded public pensions receive lower average PE returns, and match with smaller GPs on average, than less underfunded pensions. Consistent with matching and returns, firms financed by most underfunded public pensions and smallest PE funds face labor productivity decreases. I introduce a novel instrument'public unionization'in support of underfunding positions driving selection into funds. Lastly, I evaluate alternate mechanisms.
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New U.S. Business Establishments: Surging or Stalling?
June 2026
Working Paper Number:
CES-26-36
Since the 1990s, the Bureau of Labor Statistics (BLS) has reported much more rapid growth in U.S. private sector employer establishments than has the Census Bureau' the gap reached roughly 1.6 million by 2023. Using linked BLS-Census microdata, we document two main drivers. First, a large and growing number of employers providing services to the elderly and persons with disabilities are in scope for the BLS frame but not the Census Bureau's. Second, many firms appear with substantially more establishments in the BLS frame. These discrepancies substantially affect the measured establishment size distribution and quantitative policy analysis.
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The Adoption of Non-Rival Inputs and Firm Scope
April 2026
Working Paper Number:
CES-26-28
Custom software is distinct from other types of capital in that it is non-rival'once a firm makes an investment in custom software, it can be used simultaneously across its many establishments. Using confidential U.S. Census data, we document that while firms with more establishments are more likely to invest in custom software, they spend less on it as a share of total capital expenditure. We explain these empirical patterns by developing a model that incorporates the non-rivalry of custom software. In the model, firms choose whether to adopt custom software, the intensity of their investment, and their scope, balancing the cost of managing multiple establishments with the increasing returns to scope from the nonrivalrous custom software investment. Using the calibrated model, we assess the extent to which the decline in the rental rate of custom software over the past 40 years can account for a number of macroeconomic trends, including increases in firm scope and concentration.
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Allocating Misallocation: Decomposing Measures of Aggregate Allocative Efficiency
April 2026
Working Paper Number:
CES-26-26
We explore sources of measured misallocation using establishment data from U.S. manufacturing industries. We decompose standard revenue productivity dispersion statistics into contributions by dispersion in revenue margins over costs and dispersion in input cost shares across plants. We establish a formal link between these components and measured allocative efficiency. The results indicate the components contribute similarly to apparent rising misallocation in US manufacturing. We use the mapping between distortions that influence these distinct components to explore the relationship between inferred distortions and mechanisms that influence one or both sources of revenue productivity dispersion. Finally, we show rising misallocation in the US manufacturing sector in the last several decades is pervasive, and yet a few industries account for over half of the aggregate decline.
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Establishment-Level Life Cycle and Analysts' Forecasts
February 2026
Working Paper Number:
CES-26-12
This paper examines how multi-unit firms' life-cycle stages affect analyst forecast accuracy. While prior studies focus on the firm-level life cycle, we utilize the Census data and focus on the establishment level. We find that analyst forecast accuracy is lower for multi-unit firms whose establishments are in different life-cycle stages than those in the same life-cycle stage. This finding suggests that the forecasting difficulty of more diversified firms can be attributed to the different life-cycle stages of each establishment. We also find that for firms whose units are in different stages, analyst forecast accuracy is lower if the establishments in earlier stages are larger (i.e., generate more revenue) than those in later stages. As a comparison, we estimate the life-cycle stages using firms' segment classifications in their 10-K filings. We find that analysts' forecast accuracy is lower when firms report fewer segments than the number of establishments, suggesting that aggregating more establishments for segment reporting could complicate analysts' forecasting. To our knowledge, this is the first study that focuses on the establishment-level life cycle. This study highlights that firm-level life cycles should not be taken without caution, as aggregating multiple units' life cycles may be misleading. In order to provide better forecasts to investors, analysts should have a deeper understanding of firms' subunits, especially when the establishments are in different life-cycle stages.
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'Class of Customer' Question from the US Economic Census
September 2025
Working Paper Number:
CES-25-66
The Economic Census (EC) collects detailed information on the class of customers served by establishments'for example, the share of an establishment's sales to other businesses or to government entities'for a subset of sectors in the economy. In this paper, we evaluate the data from the 'Class of Customer' question from the EC, with a particular focus on sales to the government. These data have seldom been used in empirical research and are unique in that they enable researchers to link establishment-level Census data with information on government procurement.
We compile and analyze large volumes of publicly available tabulated data about the class of customer question over time. Using these data, we document three main findings. First, total sales to government from establishments covered by the class of customer question account for approximately 4 percent of GDP'just under half of total government procurement as measured in the national accounts. Second, the sectoral distribution of government expenditure is significantly different from that of private sector spending. Certain industries, such as Construction and Professional, Scientific, and Technical Services, account for a much larger share of government expenditure relative to private sector expenditure. Third, sales to the government make up a substantial portion of total sales in several sectors'for instance, 70 percent in Facilities Support Services, 30 percent in Waste Treatment and Disposal, and 17 percent in Construction. Finally, we use the microdata to examine nonresponse rates to the class of customer question across establishments based on the number of employees.
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National Chains and Trends in Retail Productivity Dispersion
September 2025
Working Paper Number:
CES-25-64
Productivity dispersion within an industry is an important characteristic of the business environment, potentially reflecting factors such as market structure, production technologies, and reallocation frictions. The retail trade sector saw significant changes between 1987 and 2017, and dispersion statistics can help characterize how it evolved over this period. In this paper, we shed light on this transformation by developing public-use Dispersion Statistics on Productivity (DiSP) data for the retail sector for 1987 through 2017. We find that from 1987 through 2017, dispersion increased between retail stores at the bottom and middle of the productivity distribution. However, when we weight stores by employment dispersion, the middle of the distribution is lower initially and decreases over time. These patterns are consistent with a retail landscape featuring more and more activity taking place in chain stores with similar productivity. Firm-based dispersion measures exhibit a similar pattern. Further investigation reveals that there is substantial heterogeneity in dispersion levels across industries.
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The Effect of the Minimum Wage on Childcare Establishments
August 2025
Working Paper Number:
CES-25-53
Childcare is essential for working families, yet it remains increasingly unaffordable and inaccessible for parents and offers poverty-level wages to many employees. While research suggests minimum wage policies may improve the welfare of low-wage workers, there is also evidence they may increase firm exits, especially among smaller, low-profit firms, which could reduce access and harm consumer well-being. This study is the first to examine these trade-offs in the childcare industry, a labor-intensive, highly regulated sector where capital-labor substitution is limited, and to provide evidence on how minimum wage policies affect a dual-sector labor market in the U.S., where self-employed and waged providers serve overlapping markets. Using variation from state-level minimum wage increases between 1995 and 2019 and unique microdata, I implement a cross-state county border discontinuity design to estimate impacts on the stocks, flows, and composition of childcare establishments. I find that while county-level aggregate establishment stocks and employment remained stable, establishment-level turnover increased, and employment decreased. I reconcile these findings by showing that minimum wage increases prompted reallocation, with larger establishments in the waged-sector more likely to enter and less likely to exit, making this one of the first studies to link null aggregate effects to shifts in establishment composition. Finally, I show that minimum wage increases may negatively affect the self-employed sector, resulting in fewer owners with advanced degrees and more with only high school education. These findings suggest that minimum wage policies reshape who provides care in ways that could affect both quality and access.
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Trade Within Multinational Boundaries
July 2025
Working Paper Number:
CES-25-46
We leverage newly linked data from the U.S. Census Bureau and the U.S. Bureau of Economic Analysis to study transactions within U.S. multinational enterprises (MNEs). We show that using administrative data on intrafirm trade allows us to correct for measurement error in survey data and to identify the positive relationship between input-output (IO) linkages and the probability of trade between U.S. parents and their foreign affiliates. We also document the prevalence of intrafirm trade: more than half (three-quarters) of affiliates worldwide (in North America) export to or import from their U.S. parent. Our findings provide strong empirical support for traditional theories of firm boundaries that predict trade between vertically linked units of the same firm, and underscore the importance of accounting for the trade frictions that shape MNEs' regional supply chains.
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