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Manufacturing Establishments Reclassified Into New Industries: The Effect Of Survey Design Rules
November 1992
Working Paper Number:
CES-92-14
Establishment reclassification occurs when an establishment classified in one industry in one year is reclassified into another industry in another year. Because of survey design rules at the Census Bureau these reclassifications occur systematically over time, and affect the industry-level time series of output and employment. The evidence shows that reclassified establishments occur most often in two distinct years over the life of a sample panel. Switches are not only numerous in these years, they also contribute significantly to measured industry change in industry output and employment. The problem is that reclassifications are not necessarily processed in the year that they occur. The survey rules restrict most change to certain years. The effect of these rules is evidenced by looking at the variance across industry growth rates which increases greatly in these two years. Whatever the reason for reclassifying an establishment, the way the switches are processed raises the possibility of measurement errors in the industry level statistics. Researchers and policymakers relying upon observations in annual changes in industry statistics should be aware of these systematic discontinuities, discrepancies and potential data distortions.
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Costs, Demand, and Imperfect Competition as Determinants of Plant_level Output Prices
June 1992
Working Paper Number:
CES-92-05
The empirical modeling of imperfectly competitive markets has been constrained by the difficulty of obtaining micro data on individual producer prices, outputs, and costs. In this paper we utilize micro data collected from the 1977 Census of Manufactures to study the determinants of plant-level output prices among U.S. bread producers. A theoretical model of short-run price competition among plants producing differentiated products is used to specify reduced-form equations for each plant's price and output. Estimates of the reduced-form equations indicate that the main determinants of both the plant's output level and output price are the plant's own cost variables, particularly its capital stock and the prices of material inputs. The number of rival producers faced by the plant, the production costs of these rivals, and the demand conditions faced by the plant play no role in price or output determination. The results are not consistent with either oligopolistic competition or monopoly behavior, but rather are consistent with price-taking behavior by individual producers combined with output quality differentials across producers.
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Price Dispersion In U.S. Manufacturing: Implications For The Aggregation Of Products And Firms
March 1992
Working Paper Number:
CES-92-03
This paper addresses the question of whether products in the U.S. Manufacturing sector sell at a single (common) price, or whether prices vary across producers. Price dispersion is interesting for at least two reasons. First, if output prices vary across producers, standard methods of using industry price deflators lead to errors in measuring real output at the industry, firm, and establishment level which may bias estimates of the production function and productivity growth. Second, price dispersion suggests product heterogeneity which, if consumers do not have identical preferences, could lead to market segmentation and price in excess of marginal cost, thus making the current (competitive) characterization of the Manufacturing sector inappropriate and invalidating many empirical studies. In the course of examining these issues, the paper develops a robust measure of price dispersion as well as new quantitative methods for testing whether observed price differences are the result of differences in product quality. Our results indicate that price dispersion is widespread throughout manufacturing and that for at least one industry, Hydraulic Cement, it is not the result of differences in product quality.
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R&D Reactions To High-Technology Import Competition
March 1991
Working Paper Number:
CES-91-02
For a seventeen-year panel covering 308 U.S. manufacturing corporations, we analyze firms' R&D spending reactions to changes in high-technology imports. On average, companies reduced their R&D/sales ratios in the short run as imports rose. Individual company reactions were heterogeneous, especially for multinational firms. Short-run reactions were more aggressive (i.e., tending toward R&D/sales ratio increases), the more concentrated the markets were in which the companies operated, the larger the company was, and the more diversified the firm's sales mix was. Reactions were less aggressive when special trade barriers had been erected or patent protection was strong in the impacted industries. Companies with a top executive officer educated in science or engineering were more likely to increase R&D/sales ratios in response to an import shock, all else equal. Over the full 17-year sample period, reactions may have shifted toward greater average aggressiveness.
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The Determinants of U.S. Intra-Industry Trade
December 1990
Working Paper Number:
CES-90-13
Responses from the Yale University survey of 650 research and development executives were linked to U.S. trade statistics at the four-digit SIC level for the years 1965-85 to test several hypotheses concerning intra-industry trade. A new index of intra-industry trade was developed to capture both the level and balance dimensions of import and export flows. Intra-industry trade is found to be more extensive, the higher industry R&D/sales ratios were, the more important economies of learning-by-doing were, and greater the relevance of academic engineering research was, and the more niche-filling strategies were emphasized in new product development. When firms oriented their R&D efforts toward meeting the specialized demands of individual customers, intra-industry trade was lower. The highest levels of intra-industry trade were found in loosely oligopolistic industries.
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THE RELATIONSHIPS AMONG ACQUIRING AND ACQUIRED FIRMS' PRODUCT LINES
September 1990
Working Paper Number:
CES-90-12
This study develops detailed information on the relationships among the activities of acquiring and acquired firms at and near the time of merger for a sample of 94 takeovers undertaken between 1977-1982. We focus on takeovers for two reasons. First, takeovers are an important and controversial phenomenon. Second, takeovers allow us to look at marginal changes, admittedly large ones, in the firm's boundaries. Thus, they provide a useful way of examining relationships among activities of the firm without having to go into great detail regarding the historical decisions that generated the firm's current structure. While the individual establishment is our basic data unit, in this study we aggregate the activities of the firm to the line of business (LOB) level. Each LOB of an acquired firm is classified as to its relationship horizontal, vertical (upstream or downstream), and conglomerate to the LOBs of the acquiring firm. Using these categorizations we aggregate the LOB-level information to the firm level to investigate the degree to which our sample of mergers is specialized to particular types of relationships. While we find a significant group of unspecialized takeovers, most appear to fit a specific category. We also look at the pattern of closed operations immediately following the takeover. Closings are generally concentrated in operations involving horizontal relationships. Finally, we consider the pattern of relationships between hostile and friendly takeovers and whether takeover premiums vary by type of merger. Merger premiums are not related to the type of relationship between the acquiring and acquired firm, but they are tied to whether the takeover is friendly or hostile.
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Returns to Scale in Small and Large U.S. Manufacturing Establishments
September 1990
Working Paper Number:
CES-90-11
The objective of this study is to assess the possibility of differences in the production technologies between large and small establishments in five selected 4-digit SIC manufacturing industries. We particularly focus on estimating returns to scale and then make interferences regarding the efficiency of small businesses relative to large businesses. Using cross-section data for two census years, 1977 and 1982, we estimate a transcendental logarithmic (translog) production model that provides direct estimates of economies of scale parameters for both small and large establishments. Our primary findings are: (i) there are significant differences in the production technologies between small and large establishments; and (ii) based on the scale parameter estimates, small establishments appear to be as efficient as large establishments under normal economic conditions, suggesting that large size is not a necessary condition for efficient production. However, small establishments seem to be unable to maintain constant returns to scale production during economic recession such as that in 1982.
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Export Performance and State Industrial Growth
January 1990
Working Paper Number:
CES-90-03
This research examines whether state industrial growth over the past decade has occurred independently of changes in manufacturing exports and whether export employment growth responds to the same economic and locational forces as employment growth in domestic production. The empirical results indicate that employment and value added growth are not independent of export sales growth; however, a shift toward export markets is not strongly associated with higher manufacturing growth rates. Traditional factors account for a far greater proportion of the variation in domestic than export employment growth. The results suggest the need for additional research on the sources of state comparative advantage in export markets.
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An Analysis of Small Business Size and Rate of Discontinuance
January 1990
Working Paper Number:
CES-90-02
This study investigates small business failure rates in relation to several measures of firm size. Utilizing the new Characteristics of Business Owners ( CBO ) data base, a nationwide sample of firms is utilized that is representative of the small business universe. One subset--small business employers--is shown to have relatively low rates of failure, while another group--very small firms with no employees--exhibits relatively high rates of business discontinuance. The finding that the probability of firm failure is strongly (inversely) related to firm size is shown to hold up as well when the age of the business is controlled for.
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The Characteristics of Business Owners (CBO) Database
October 1989
Working Paper Number:
CES-89-09
The Bureau of the Census conducted the Characteristics of Business Owners (CBO) survey for the Small Business Administration and the Minority Business Development Agency in 1986. The CBO collected information from a national sample of 126,000 business owners, surveying the demographic and economic characteristics of owners and the economic performance of their firms. A major feature of the CBO is the large numbers of Hispanic, Asian and Other, Black and Women businesses, in addition to nonminority, male-owned businesses. The CBO data series also serves the broader purpose of providing data on characteristics of owners and firms in the small business population. This paper provides a report of the purpose, content, and basic procedures used for the survey and presents a preliminary discussion of the coverage and overall response.
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